In regards to how the Fed affects asset prices....I used to consider gold (and silver) investments to be the realm of the tinfoil hat club, but around Q4, 2018 I started buying them heavily. The research I’ve done has led me to believe that the gold price, over long periods, basically follows the money supply, and we all know money is being “printed” by the trillions currently. Obviously a bunch of printed money finds its way into stocks, but it pretty directly affects gold prices as gold is, more or less, a fixed quantity that can’t be printed so it takes more newly minted dollars to buy one unit of gold. What may surprise some on this forum is that gold has outperformed the S&P 500 for the five year, fifteen year and twenty year periods that end now. (For the last 10 years stocks have outperformed in a bigly way, but I suspect that outperformance will abate since many companies are ending their buyback programs which have been the primary source of US stock demand for the past 4-5 years.). Silver hasn’t done so well, but it’s currently very cheap compared with gold (the gold/silver ratio) which historically has led to major outperformance from silver.
Like most of us, I was raised on buy and hold index stock investing. But the Fed has manipulated markets so much for a couple decades now that I decided to dig a bit deeper into how their actions affect various asset classes, and to open my mind to alternatives I wouldn’t have previously considered.
