What the Fed's evolving policy means for stocks💸

Tighter monetary policy is the effect, not the cause

Stocks usually go up, even when the Fed pulls support. (Source: Getty Images)

🚨 NEWS: President Joe Biden will nominate current Federal Reserve Chair Jerome Powell to a second term at the helm of the central bank. The decision was widely expected and has buy-in from current Treasury Secretary and former Fed Chair Janet Yellen.

A Powell-run Fed signals continuity for the direction of monetary policy. This means that if the labor market continues to make progress towards maximum employment and inflation continues to run a bit above long-term targets, then quantitative easing (QE) will continue to be tapered and interest rates will eventually be hiked.

What does all this mean for stocks?

Some market prognosticators warn that the removal of monetary support from the Fed spells trouble for the stock market.

However, history shows that stocks tend to perform relatively well during these periods.

Stocks went up as the Fed tapered QE