In 2022, the Federal Reserve halted its money printing for nine months, leading to a rise in headline inflation to over 8%. The impact was felt in the stock and bond markets, with stocks dropping 18% and safe US Treasuries losing 31% of their value. Despite the economic conditions not indicating a recession, the markets reacted negatively to the lack of liquidity caused by the Fed’s measures. The stock market and the actual economy were shown to be separate entities, with bull markets thriving on liquidity.
The significant increase in liquidity in 2021 led to high inflation, which prompted the Federal Reserve to tighten its monetary policy in 2022. However, by September 2022, the UK bond market experienced a significant drop, causing central banks, including the Fed, to reverse their tightening measures. This move led to a stabilization in reserve levels of banks and the start of a new bull market. Gold and Bitcoin saw surges in value, while stocks continued to rise slowly.
Despite the fluctuations in the market, history shows that stocks ultimately push higher after a pullback, indicating that dips should be seen as buying opportunities. Dividend growers are seen as a favorable investment choice in this environment, as they provide strong profits, top-line numbers, and attract trend followers. For example, Amgen was recommended as a pullback play for investors, as the company’s dividend payouts and steady growth in rare disease treatments signaled a potential increase in stock price.
Amgen’s share price reflected the impact of good test results for its weight loss drug and the Fed’s decision to loosen monetary policy. This resulted in a 14% increase in the stock price, demonstrating the benefits of investing in dividend growers during times of monetary policy changes. While the stock market may experience fluctuations in the future, investors are advised to focus on dividend growers for long-term gains. The current environment encourages investors to capitalize on opportunities in the market, despite mediocre economic numbers.
As the money printing season continues, investors are urged to stay focused on the potential gains that dividend growers can offer. The impact of economic data on the market may vary, and investors should remain vigilant for buying opportunities. While past trends and market conditions can provide insights, staying informed and making strategic investment decisions will ultimately lead to long-term success in the financial markets.
