Don’t Fight the Fed

Lesson #1: Don’t Fight the Fed

One of the most important investing lessons I’ve learned came in the spring of 2022.

We had just closed our first deal with a new institutional equity partner, the first of what was supposed to be multiple deals. Shortly after, the Fed began one of the fastest and most aggressive tightening cycles in decades.

I remember talking with a few partners on their team, each with decades more experience than me, and they said something simple that stuck:

“𝐘𝐨𝐮 𝐬𝐡𝐨𝐮𝐥𝐝 𝐧𝐞𝐯𝐞𝐫 𝐟𝐢𝐠𝐡𝐭 𝐭𝐡𝐞 𝐅𝐞𝐝.”

They went pencils down almost immediately. Not just on one deal, but across their entire platform. We continued to monitor the market and deal flow, but ultimately followed suit shortly thereafter.

That moment reinforced a hard truth:

When monetary policy shifts this quickly and this dramatically, macro always wins. Even proven strategies break. Even deals that look good on paper stop working.

You don’t control the Fed. You don’t control the speed or direction of tightening, even when it feels counterintuitive to what the Fed should do.

𝐖𝐡𝐞𝐧 𝐭𝐡𝐞 𝐅𝐞𝐝 𝐭𝐢𝐠𝐡𝐭𝐞𝐧𝐬, 𝐢𝐭’𝐬 𝐭𝐢𝐦𝐞 𝐭𝐨 𝐠𝐞𝐭 𝐝𝐞𝐟𝐞𝐧𝐬𝐢𝐯𝐞.

That lesson will stick with me for the rest of my career.