The EconomistThe Economist

Surging stocks undermine a hallowed investing rule

07 Feb 2023 · 3 min read

If you've bought stocks over the last few months, you've likely seen a handsome return. The Economist explains why markets have soared of late, even as central banks continue to raise interest rates.

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If you are 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—the s&p 500 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.

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