one of the many buyers of American stocks or Treasury bonds in the past four months, or indeed a buyer of most financial assets over the period, then this article has a message for you: congratulations. Not only have you achieved pretty healthy returns—the500 index of big American firms is up by 15%—but you have done so while violating one of Wall Street’s cardinal rules.
The phrase “don’t fight the Fed” is associated with Martin Zweig, an American investor renowned for predicting a crash in 1987. Zweig’s logic was simple. Falling interest rates are good for stockmarkets; rising ones are not. But the phrase’s scope has expanded over time. Zweig’s dictum is now used to suggest that betting against the institutions which print money and employ thousands of economists is always unwise.three times and markets have surged.
Traders defer to the Fed’s analysis in large part because they presume it is based on superior information. An influential piece of research, published in 2000 by Christina and David Romer, two economists, seemed to confirm that the Fed’s forecasts are more accurate than those of its commercial rivals. But subsequent studies have produced different results.
Moreover, a little central-bank fighting can be good for the broader financial system. Unless a central bank wants to control market interest rates directly, by buying enormous amounts of assets, as in Japan, policymakers must sometimes conduct “open-mouth operations”.
To refine guidance central bankers need people to take positions in financial markets, which they can react against. After all, as another Wall Street credo notes: disagreement is what makes a market. Buyers need sellers, and the information about what investors expect in aggregate is revealed in market prices.
Is pump & dump a canonical piece of Wall Strret advice?
Daha iyisini bulduğun zaman.