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Invest with the Fed: Maximizing Portfolio Performance by Following Federal Reserve Policy by Luis Garcia-Feijoo, Gerald R. Jensen, Robert R. Johnson

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CHAPTER 1

FED MONETARY POLICY AND THE PERFORMANCE OF TRADITIONAL ASSET CLASSES

In the stock market, as with horse racing, money makes the mare go.

Martin Zweig, from Martin Zweig’s Winning on Wall Street

It is widely acknowledged that Fed policy plays an important role in the performance of U.S. security markets. Among investors, however, there is considerable debate about whether investors can actually use monetary policy changes to improve their investment performance. We all know that investors are bottom-line-oriented. For them, the value of any indicator variable, such as Fed policy shifts, depends on whether that variable can be used to their advantage. With that consideration in mind, this chapter is devoted to the evaluation of the historical ...

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