The Federal Reserve System (FRS) is the central bank to the U.S. government. Their main function is to set monetary policy to uphold a dual mandate: a) keep employment steady and b) maintain a healthy inflation rate of around 2% per year. How would you say they are performing on those economic measures? (rhetorical question)
Since 2008, the fed has failed to hit that 2% objective. Usually, the monetary tool used to maintain that steady inflation rate is interest rate manipulation. However, since the fed no longer needs to hit that 2% target every year and instead need to keep an “average” inflation rate, there are simply no ramifications for the fed to ever touch interest rates.
What does this mean for investors? Interest rates will remain low, allowing for the rising prices in the stock market – as long as money keeps on getting printed…
Should you embrace this new monetary normal by ignoring economic data and solely focusing on the stock market? We think not, but at the time being, it does allow for HUGE gains in the stock market.
Watch the full interview to see which stocks could take advantage of this “modern monetary theory”.
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