Book summary: Invest with the Feds by Robert R Johnson, Gerald Jensen and Luis Garcia Feijoo

Types of federal monetary policy environment

  • Expansive
  • Indeterminate
  • Restrictive

Expansive monetary policy

  • Small cap companies benefits by gaining easier access to credit for expansion
  • Mortgage REITs experience lower interest rate expenses and improved profit margin
  • cyclical sectors will tend to outperform during this period – tends to have high beta
    • autos
    • construction
    • manufacturing
    • technology

Restrictive monetary policy

  • Small cap companies will experience more difficulties raising capital to fund expansion as compared to blue chip companies
  • Equity REITs will outperform Mortgage REITs during this period
  • Commodities will out perform in a restrictive monetary policy environment aimed at curbing inflation – especially industrial metals

Consistent performance across all monetary policy environment

Tends to have low beta

  • energy
  • utilities
  • food
  • financing
  • consumer goods

Stages of business cycles

  • Early stages
  • Late stages

Early stage of business cycle

  • Technology and transportation will outperform

Late stage of business cycle

  • Consumer staples and energy will outperform

International strategies

  • Scandinavian countries have the least correlation against US economy
  • Scandinavian countries has the least amount of debt to GDP versus
    • US
    • other European countries
  • Scandinavia countries have a higher savings rate
REITs returns versus Stocks and Bonds across various monetary policy environments
Strategy returns across various monetary environments
Commodity returns and asset class returns in various monetary policy environments
Sector returns in various monetary policy environments
Sector beta



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