RL109 – Fed Effects, Hormesis, and Investment Expectations
Today on the Retirement Lifestyle Show, Roshan Loungani, Erik Olson, and Adrian Nicholson add another episode installment to the “Bring Your Own Topic” series. They talk about how Fed policies influence market movements, how stress can actually be a good thing, and why predicting the profitability of a stock is never that easy.
[03:10] Breaking Down the Fed’s Primary Mandate
[06:28] How does Fed Policy Influence the Markets?
[14:30] Raising Rates and Dealing with the Probability of a Recession
[19:00] Inflation vs. Recession: The Fed Is Walking a Tightrope
[23:35] When Stress is Actually Good For You
[25:50] Examples of Good Stress
[31:00] The Impact of Stress When Building Resilience
[36:00] Setting Realistic Investment Decisions
[42:29] Mutual Funds That Have Outperformed the S&P 500
[51:00] Why Predicting the Profitability of a Stock is Never That Easy
[52:28] Why You Need to Avoid Emotional Investing
[56:10] Parting Thoughts
For more links and the full show notes keep scrolling down!
Roshan Loungani can be reached at roshan.loungani@aretewealth.com or at 202-536-4468.
Erik Olson can be reached at erik.olson@aretewealth.com or 815-940-4652.
Adrian Nicholson can be reached at adrian.nicholson@aretewealth.com or at 703-915-8905.
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Full Show Notes:
How Does Fed Policy Influence Financial Markets?
It’s no secret that the markets can be quite fragile and sensitive sometimes. Merger rumors, silent whispers, and leaking information can impact dozens of companies from all parts of the world. The good news is that every new bit of information that pops up is often analyzed by investors and financial analysts, and appropriate changes are made. That said, there’s nothing quite like how the Federal reserve makes investors stop and reassess their beliefs. The Fed is a power to be reckoned with in today’s financial environment. It has the ability to control the money supply, interest rates, and influence inflation. These three, when combined together, are the critical pieces that impact every corner of the financial market. As such, when the Fed makes changes to any of their policies, like they did in mid-March, investors take it seriously. And they should because the Fed’s stated mandate is to maximize employment, manage inflation, and create a stable financial system. It doesn’t care about your portfolio allocations, and so it’s up to you to keep track of Fed policies but maintain a cool head whenever changes are made.
When Stress is Actually Good For You
Americans are a stressed lot. We stress about everything but if you’re a glass-half-full kind of person, being stressed might not be so terrifying. There are two types of stress: the abnormal amounts that cause sweaty, sleepless nights and the good stress that’s just enough to get you motivated, excited, or intrigued. Unfortunately, most people don’t know how to differentiate between these two types of stressors. For example, perhaps you’re about to start going to the gym for the first time. Sure, you’re petrified; it’s not something you’ve ever done before, so it’s natural to feel uncomfortable stepping into this new phase of life. But that’s good stress and it can be a good thing because, at the end of the day, what’s the worst that can happen? That’s where hormesis comes in, the good type of stress. Hormesis happens when you push your body, and it responds by becoming more resilient. Hitting the gym and lifting weights is a classic example of hormesis. When you damage your muscle fibers, they automatically build back bigger, better, and stronger.
Your body is designed to handle minor and occasional stress. However, too much stress can throw your body off-balance. But if you can harness the power of that stress to build resilience and determination, then hormesis can be your “what doesn’t kill you makes you stronger” type of stress.
All opinions expressed by podcast hosts and guests are solely their own. While based on information that they believe is reliable, neither Arete Wealth nor its affiliates warrant its completeness or accuracy, nor do their opinions reflect the opinion of Arete Wealth. This podcast is for general informational purposes only, and should not be regarded as specific advice or recommendations for any individual. Before making any decisions, consult a professional.