● Invest with the Fed: Maximizing Portfolio Performance by Following Federal Reserve Policy
By Robert R. Johnson, et al.
Essay by co-author (Robert R. Johnson) via ValueWalk
In a recently published McGraw-Hill book – Invest with the Fed – my co-authors, Gerald R. Jensen from Northern Illinois University, Luis-Garcia-Feijoo from Florida Atlantic University, and I, provide a comprehensive analysis of capital market performance across different Fed policy periods from 1966 to 2013. This book is a culmination of over 25 years of rigorous academic study of Fed policy and capital market returns. In it, we examine returns to different asset classes – stocks, bonds, Hedge Funds, alternative assets, and foreign equities – and also study returns to different equity styles (value, growth, and momentum).
One of our most interesting findings is that it isn’t so much the absolute level of interest rates that is related to security returns, but rather, the direction of interest rate changes that is important.
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