Lesson: Don’t Fight the Global Fed

Why did the markets begin to go up in 2012 and never come down? Why was 2013 one of the best years for stocks on record?

Investors re-learned the lesson of not only not fighting the Fed, but also not fighting the Global Fed. That’s right, we’re all connected now.

In September 2012, the Bank of Japan launched its eight quantitative easing plan, bringing total asset purchases to 80 trillion yen. The ECB handed out another 529.5 billion euros, taking their bank lending program to north of 1 trillion euros. Also in September, the US Federal Reserve announced QE3, adding to the $2.3 trillion in liquidity they had already pumped in ad committing to another $40 billion in fresh cash per month indefinitely. In July of that year, the UK added another 50 billion pounds to their 375 billion pound asset purchase plan. There were also a total of 33 rate cuts around the world in addition to all of this asset purchasing, seen below…

Here’s a chart from the Center for Applied Research on 2012’s Ease-a-palooza:


global fed

In hindsight, buying stocks seems like the obvious reaction to all of this stimulus coming from everywhere at once, does it not? Why was it so hard to do at the time for so many?

Three years ago I started thinking about the tsunami the Fed was sending toward the stock market. In October 2010, I talked about how “the more agile among us may want to start paddling their surfboards in front of the right wave now.” It took a year from there before the wave could be spotted offshore in the form of QE2, but ever since then…

The lesson here is one you’ve already heard before – don’t fight the Fed and especially don’t fight every Fed around the world when they begin to ease all at once.

If the entities in control of trillions of dollars all want asset prices to be higher at the same time, what the hell else should you be positioning for?

It’s complicated, but it’s not always so complicated.

I know, I know, this will end badly. Someday.

Read Also:

When the Levee Breaks (TRB)

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.

What's been said:

Discussions found on the web
  1. real-primewire.club commented on Sep 16

    … [Trackback]

    […] Find More here on that Topic: thereformedbroker.com/2013/11/10/lesson-dont-fight-the-global-fed/ […]

  2. Bitcoin Era Review commented on Sep 22

    … [Trackback]

    […] Info to that Topic: thereformedbroker.com/2013/11/10/lesson-dont-fight-the-global-fed/ […]

  3. larryallenhvac.com commented on Oct 19

    … [Trackback]

    […] There you can find 34840 more Information on that Topic: thereformedbroker.com/2013/11/10/lesson-dont-fight-the-global-fed/ […]

  4. 먹튀검증업체 commented on Nov 07

    … [Trackback]

    […] Read More to that Topic: thereformedbroker.com/2013/11/10/lesson-dont-fight-the-global-fed/ […]

  5. DevOps consultants commented on Nov 23

    … [Trackback]

    […] Find More to that Topic: thereformedbroker.com/2013/11/10/lesson-dont-fight-the-global-fed/ […]

  6. equation of quality commented on Nov 24

    … [Trackback]

    […] Find More here on that Topic: thereformedbroker.com/2013/11/10/lesson-dont-fight-the-global-fed/ […]

  7. regression testing approach commented on Nov 25

    … [Trackback]

    […] Find More here on that Topic: thereformedbroker.com/2013/11/10/lesson-dont-fight-the-global-fed/ […]

  8. tangerine sign in commented on Nov 26

    … [Trackback]

    […] Read More on on that Topic: thereformedbroker.com/2013/11/10/lesson-dont-fight-the-global-fed/ […]

  9. 토토사이트 commented on Dec 16

    … [Trackback]

    […] Read More on that Topic: thereformedbroker.com/2013/11/10/lesson-dont-fight-the-global-fed/ […]

  10. 二手车 commented on Jan 15

    … [Trackback]

    […] Read More to that Topic: thereformedbroker.com/2013/11/10/lesson-dont-fight-the-global-fed/ […]