Abstract
The authors note that money managers and investors spend a great deal of time and effort designing portfolios that reflect different investment styles. While many previous studies indicate that the choice of equity styles matters, it certainly does not represent the only relevant consideration. The results presented in this analysis indicate that regardless of investment style, returns during expansive monetary policy periods are markedly higher (and volatility is markedly lower) when compared to restrictive periods. At a minimum, the results suggest that investment professionals may want to educate their clients concerning the influence of Federal Reserve policy on equity market returns. Further, they suggest that preparing clients for the distinct possibility of lower returns during restrictive monetary policy periods may lead to more content investors and allows money managers to spend more time on the business of creating and monitoring portfolios and less time on explaining what happened.
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