All Eyes Are on Kevin Warsh: 1 Reason the Federal Reserve's Actions Don't Matter to Long-Term Investors.
Key Points
The Fed’s policy decision following its current meeting will end up being a blip on the radar in the grand scheme of things.
If investors want to do well, they should focus on what they can control, which is buying and holding high-quality stocks.
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As of this writing on the afternoon of July 28, the Federal Reserve is in the middle of its policy meeting. According to trading activity used by the CME Group's FedWatch tool, there is a 68.5% probability that the fed funds rate will stay unchanged. It's currently within 3.5% and 3.75%.
The central bank, and new chair Kevin Warsh, seemingly get all the attention these days. This can make the average investor's head spin. But here's one reason why the Federal Reserve's actions don't matter to long-term market participants.
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Kevin Warsh, Fed Chair. Image source: Federal Reserve.
The S&P 500 index (SNPINDEX: ^GSPC) has produced a total return of 749% in the past 20 years. This impressive gain happened regardless of who was leading the central bank.
Before Warsh, it was Ben Bernanke, Janet Yellen, and Jerome Powell. Their commentary and votes might have had a short-term impact on stocks, but the long-term trend is undeniable. And any updates from policy meetings end up being a blip on the radar.
The market has performed well, benefiting those who stay patient and disciplined. I'm convinced that investors would be much better off not paying any attention at all to the Fed. Protect your peace of mind.
Instead, focus all your effort on building a diversified portfolio of high-quality stocks. If chosen correctly, these businesses will have zero problem navigating changing macroeconomic conditions.
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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CME Group. The Motley Fool has a disclosure policy.
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