Morning Comment: Don't Blame The Fed

Well, we finally did get a relatively uneventful day in the stock market yesterday. The DJIA closed in positive territory…while the S&P 500 closed with a very mild loss (and the Nasdaq & Russell 2000 finishing the day with a bit larger losses). The volume was even lower than it was on Monday…and the futures are trading with very close to unchanged levels this morning. Therefore, we just might get a relatively calm “last week of the year” after all……That said, “thin” markets can change on a dime, so investors will want to stay nimble over the next three days.

We hope that you and/or your loved ones that traveled of for the holiday have been able to their destinations. As we’re sure you’ve all heard, a lot of flights have been cancelled in recent days…do to a shortage of workers at the airlines. Workers have been calling in sick because they have either tested positive for Covid, have developed covid-like symptoms, or are afraid of the contracting the virus. (If you think this week was bad with the airlines, just wait until next week…when teachers start calling in sick for the same reasons.)

It is great that people have ramped up their testing. However, let’s not kid ourselves, the ramp-up in testing is NOT keeping things open. In fact, it’s doing just the opposite…it’s causing things to shut down! Don’t get us wrong, “more testing” is definitely the right thing to do…but it is not allowing things to stay open…at least not over the near-term.

In other words, the increased level of testing is making more people aware that they have the virus…and thus it is causing some problems. (Just ask the professional and college sports teams.) However, sometimes “doing the right thing” (like increasing testing) can cause some pain over the near-term…BUT we still have to do them. It’s better for the longer-term!

This is something people should consider when they’re thinking about what the Fed is doing with their more aggressive tightening policy. It IS the right thing to do…even though it will very likely cause some pain for investors. Therefore, we would argue that investors will have nobody to blame but themselves if they do not take the time NOW to prepare themselves for a little bit of pain in 2022.

Probably the best and most accurate “old saying” on Wall Street is, “Don’t fight the Fed.” Well, the Fed is now tightening…and despite what some pundits try to claim, history tells us that it is only a matter of time before their tightening policy has a negative impact on the stock market.

Again, in our opinion, the Fed is doing the right thing. Whether you agree that it’s the right thing or not is immaterial. They ARE tightening. Therefore, investors should be adjusting their portfolios accordingly……..When the market gets hit hard, investors can complain all they want about how the Fed made a “policy mistake.” However, they will only have themselves to blame….because they will have had plenty of time to prepare for the impact of the Fed’s policy change while the stock market was at all-time highs.

Matthew J. Maley

Chief Market Strategist

Miller Tabak + Co., LLC

Founder, The Maley Report

275 Grove St. Suite 2-400

Newton, MA 02466


Although the information contained in this report (not including disclosures contained herein) has been obtained from sources we believe to be reliable, the accuracy and completeness of such information and the opinions expressed herein cannot be guaranteed. This report is for informational purposes only and under no circumstances is it to be construed as an offer to sell, or a solicitation to buy, any security. Any recommendation contained in this report may not be appropriate for all investors. Trading options is not suitable for all investors and may involve risk of loss. Additional information is available upon request or by contacting us at Miller Tabak + Co., LLC, 200 Park Ave. Suite 1700, New York, NY 10166.

Posted to The Maley Report on Dec 29, 2021 — 8:12 AM
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