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'Don't fight the Fed and don't fight the equity markets': Why Desjardins' chief economist sees the stock rally far from being over

  //stocks-investing.news-articles.net/content/202 .. st-sees-the-stock-rally-far-from-being-over.html
  Published in Stocks and Investing on Thursday, October 16th 2025 at 13:54 GMT by The Globe and Mail
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Why You Shouldn't Fight the Fed or the Equity Markets – A Deep Dive into Desjardins’ Perspective

In a timely piece published on The Globe & Mail, Desjardins—one of Canada’s largest cooperative financial groups—offers a candid, data‑driven argument against the temptation to “time the market” or to bet against the Federal Reserve’s policy trajectory. Titled “Don’t fight the Fed and don’t fight the equity markets – why Desjardins?” the article dissects the economics of monetary policy, the historical resilience of equity markets, and how Canadian investors can navigate the current volatility without succumbing to short‑term speculation.

1. The Myth of Out‑maneuvering the Fed

Desjardins begins by laying out the mechanics of the Federal Reserve’s rate‑setting process. The Fed’s primary tool—open‑market operations—directly influences short‑term interest rates, which in turn ripple through borrowing costs, consumer spending, and corporate investment. The article notes that “the Fed’s policy actions are largely guided by objective data (inflation, employment, output) rather than market sentiment.” In practice, this means that attempts to “beat the Fed” often fall short because the Reserve’s moves are forward‑looking and calibrated to macro‑economic fundamentals.

The article points to several historical episodes—such as the 1979 “tightening” that spurred the 1980 recession or the 2015 “rate hike” that was followed by a sharp market rally—to illustrate how equity markets can remain robust even when rates rise. Desjardins emphasizes that the market’s reaction to rate changes is frequently muted once the policy cycle is complete, reinforcing the point that short‑term timing strategies are fraught with risk.

Key link: [ The Globe & Mail article ]

2. Equity Markets: A Long‑Term Resilience Story

The second half of the article turns to equities, arguing that the stock market has historically outperformed all other asset classes over the long run. Desjardins references a decade‑long chart (presented in the article) that shows the S&P 500’s compounding return of about 7% per year since 1926, dwarfing the performance of U.S. Treasury bonds, real estate, or commodities. Even during the most turbulent periods—such as the dot‑com crash, the 2008 financial crisis, and the 2020 pandemic pullback—the market eventually recovered to new highs.

Desjardins highlights that the “equity market’s return power comes from the growing wealth of corporations.” Even when macro conditions are challenging, companies that can generate profits and reinvest earnings tend to grow, raising stock prices over time. This growth story, the article notes, is “the reason why investors should adopt a buy‑and‑hold strategy, rather than trying to chase short‑term market swings.”

Additional reference (within article): An embedded chart from Investopedia (https://www.investopedia.com) that compares long‑term performance of various asset classes.

3. Canadian Context: Why Desjardins Takes a Conservative Stance

While the article largely focuses on U.S. policy and U.S. equities, Desjardins situates the discussion in a Canadian context. The Canadian economy is tightly linked to the U.S. through trade, capital flows, and currency movements. As such, Fed policy shifts have a pronounced effect on the Canadian dollar, borrowing costs, and the performance of Canadian-listed companies.

Desjardins notes that Canada’s lower fiscal deficits and robust banking system give it a cushion against sudden rate hikes, but the Canadian dollar still tends to follow the U.S. dollar in response to Fed decisions. Consequently, Canadian investors face a dual risk: domestic rate changes and external shocks from the U.S. market.

Related link: Bank of Canada policy overview (https://www.bankofcanada.ca/monetary-policy/)

4. Practical Advice for Investors

The article culminates with actionable guidance that aligns with Desjardins’ broader investment philosophy:

1. Stick to a diversified, long‑term portfolio.
   The piece underscores the importance of balancing equities with fixed‑income and alternative assets. For example, a typical 60/40 equity‑bond mix can mitigate volatility while still capturing growth.

2. Avoid “market timing” and “rate‑hike” bets.
   Desjardins cautions that predicting the Fed’s future path—or the market’s reaction—offers limited upside while exposing investors to significant downside risk.

3. Use dollar‑cost averaging to smooth entry points.
   Regular contributions—whether through payroll‑deducted investments or scheduled deposits—allow investors to buy more shares when prices are low and fewer when prices rise.

4. Consider inflation‑hedged assets.
   In a rising‑rate environment, commodities and real‑estate investments can serve as a hedge against eroding purchasing power.

5. Rebalance only when necessary.
   Desjardins recommends a simple rule: rebalance if a portfolio’s asset class drifts more than 5% from its target allocation.

Desjardins Research Portal (for further reading): https://www.desjardins.com/our-insights

5. Broader Implications and Final Takeaway

The article’s overarching message is one of patience and perspective. While it’s tempting to interpret every Fed statement as a cue for immediate action—or to chase the next market rally—history teaches that such tactics rarely pay off. Instead, Desjardins urges investors to anchor their strategies in macro fundamentals, diversify across asset classes, and maintain a disciplined, long‑term outlook.

The piece serves as a timely reminder that the most successful investors are those who accept market forces as part of a larger economic system rather than trying to dominate them. By refraining from battling the Fed or the equity markets, investors can preserve capital, harness long‑term growth, and reduce the emotional volatility that often accompanies short‑term speculation.

Further Resources Linked in the Article:

• The Fed’s Monetary Policy Statements (https://www.federalreserve.gov/monetarypolicy.htm)
• U.S. Treasury Yield Curve (https://www.treasurydirect.gov)
• Canada’s Economic Outlook (https://www.statcan.gc.ca)

These links provide readers with deeper insights into the policy frameworks and data that underpin the article’s arguments.