What Is the Fed Tapering, and How Is It Affecting the Markets?

March 09, 2022

What is the Fed tapering, and how is it affecting the markets? Find out more on this hot topic in this week's Arista Advice.

Hello, welcome to Arista Advice. Question of the week is: "Paul, what is the Fed tapering, and how is it affecting the markets?" It's a terrific question. Almost any paper you pick up right now everyone's talking about the Federal Reserve.

The Federal Reserve's two primary jobs are to have low inflation and mild unemployment. Now the Federal Reserve has 12 board governors representing from the 12 Fed districts throughout the United States. California, being Fed district number 12 located in San Francisco, is the largest geographical Fed district.

I actually did a paper on this at graduate school at Pepperdine for many, many weeks, and so I do understand and do enjoy the Federal Reserve and many people are talking about it, but the Federal Reserve, they have a three-stage process - they go from easy to neutral to tightening.

They've been easy by printing stimulus, by reducing interest rates to stimulate the economy. It is now very apparent that they overstimulated the economy in 2020, because of Covid, and in 2021. Now they're going into neutral and tightening. They've indicated they will be raising interest rates three times this year. Many people are saying four, maybe five. So as the Federal Reserve, their job is to keep things neutral. Tapering is how the Federal Reserve puts the brakes on the economy. It's important to keep inflation in control, so I'm confident the Federal Reserve is aware of inflation. Inflation is something that you can't treat or take lightly.

Stay focused on the long-term goals. Don't overreact. Remember to stay calm in a short-term world, and thank you for listening and remember to go to AristaWealth.com to get other videos, tools, tips, and resources to help you live a life of significance, and don't forget to subscribe, rate, and review.