Three Market Realities to Embrace Now

For long-term investors, this week’s amazing equity volatility is little more than a distraction. But the moves we’ve seen in the last few days shouldn’t be shrugged off: they are indicative of a market that is facing a host of new fundamentals. 

Serious investors should pay heed to the following: 

1) It’s Over for the Fed

As evidenced by Thursday’s reversal, the days when the Fed can end a market decline with a few choice words are over.  Sure, they can dictate short-term rates, but long-term rates are set in the marketplace. 

As I said in my third quarter commentary, a steepening yield curve—higher long-term rates and low short-term rates—is inevitable.  

Banks should be the biggest beneficiaries, so an allocation switch to large cap value is in order. 

2) The Dollar Will Keep Appreciating