The Fed Has Your Back, So Buy Hypergrowth Stocks
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What an interesting week in the markets, huh?
Things started off ugly. On Monday, stocks plunged. On Tuesday, they tried to bounce back, but failed. On Wednesday, they did bounce back — and the big gains kept flowing into the end of the week.
Why all the volatility? The Fed.
Long story short, the market today is propped up on infinite liquidity, which is a byproduct of the Fed’s hyper-accommodative monetary policy, a lot of which was instituted in early 2020 in response to the Covid-19 pandemic.
But a big chunk of the negative economic impacts of Covid are fading now, so there are concerns that the Fed is going to tighten that hyper-accommodative monetary policy — something that, if done too quickly and too aggressively, could spark a stock market crash.
If the Fed were to do that, they would announce such actions after one of their regularly scheduled 2-day meetings. Well, this week — on Tuesday and Wednesday — the Fed had one of those meetings.
Ahead of that meeting, stocks struggled, on fears that the Fed would announce Wednesday afternoon that they were going to tighten monetary policy, which would cause a stock market crash.
Then, the Fed came out on Wednesday and said they weren’t going to budge. Stocks popped in response, and have kept rallying ever since.
Make no mistake. This is all that matters in the markets right now.
The Federal Reserve and its voting members are the masters of the financial universe. That’s always been true. They dictate the policy which controls the flow of money in the economy.
But their control over the U.S. economy and the markets has grown significantly over the past few years.
It really all started during the 2008 Financial Crisis, when the U.S. economy needed additional funding to save itself from a collapse of unprecedented proportions. The Fed was able to provide that funding.
Since then, they haven’t stopped providing that funding, and U.S. businesses, workers, investors, and markets have grown addicted to this extra Fed funding. Pull the rug on it — and boom, you could get that big crash we avoided 13 years ago.
A lot of bears use this logic as rationale to remain bearish on stocks. But that’s the wrong way of looking at things. In reality, this is super bullish.
Embrace Hypergrowth Stocks
That’s because the Fed also understands that the U.S. economy and market are dependent on them to keep loose monetary policy, so they’re going to keep monetary policy very accommodative for the foreseeable future — if not forever.
In other words, folks, the Fed has your back.
What does that mean? You can invest with confidence. The masters of the financial universe are behind you. They want to push the markets higher.
Investors are starting to realize this after the Fed didn’t move monetary policy this past week. That’s why they’re piling into the markets hand-over-fist.
You should be doing the same.
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We earnestly believe joining us at Innovation Investor could be the best financial decision you could ever make — and that, with the Fed behind us, there’s never been a better time to join than right now.
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On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.