Forget “Don’t Fight the Fed”…Don’t Fight the Virus!!

FACT State Weekly Infection Rate

Investors would benefit from heeding, “Don’t fight the virus” over “Don’t fight the Fed”.

“Don’t fight the Fed” is often the retort when questions surrounding today’s heady stock market valuations are raised. Is that sound advice? Not today.

Many investors are betting on the Fed’s ability to prop up equity markets via its flooding financial markets with liquidity. This has had an initial positive impact on stock market valuations and the Fed can prop up markets for a time. However, it has its limits, much like when governments try to prop up a currency. These limitations are especially relevant in today’s COVID-19 environment.

The Fed is fighting against the economic effects of the virus which means it is indirectly fighting against a virus a.k.a. Mother Nature. That is a battle that rarely ends well for anybody except Mother Nature. Absent a near-term vaccine, Mother Nature can easily outlast the Fed and recent infection data clearly give the edge to Mother Nature over the Fed.

In just a little over two months, the infection rate in the FAACT states (FL, AZ, AL, CA, TX) has spiked 900%.


The economic implications of future government restrictions on economic activity in those states cannot be overstated.

Source: Solutionmics using USAFacts data

Yet, equity markets continue their march toward pre-pandemic levels. Should the S & P 500 be within 5% of its pre-pandemic levels? No, but the market is deciding to not fight the Fed when they might do well to consider not fighting the virus.

Investors would benefit from heeding, “Don’t fight the virus” over “Don’t fight the Fed”.