SWN - 2 Generational Trends Reverse: The Fed Inflation Policy And The FAANG Stock Boom
Thirty-nine years ago, the 10-year US Treasury yield peaked at 15.312% and interest rates began declining. On August 27, Federal Reserve Chairman Jerome Powell presented the Fed’s new policy that “will likely aim to achieve inflation moderately above 2 percent for some time.” This marks a profound shift in a four-decade policy - the inflation fighting posture championed by Federal Reserve Chairman Paul Volcker now takes a backseat to fuller employment. The critical consequence of this policy change is that future returns on stocks and bonds will no longer be bolstered by declining interest rates.