Desk Slang · Core
Don't Fight the Fed
Don’t fight the Fed is the rule of thumb that a determined policy impulse (easing or tightening) will eventually dominate discretionary macro views.
Definition
It is not ‘the Fed is always right.’ It is that the Fed’s balance sheet and rate path are larger than your book. Fighting a hike cycle with levered duration, or fighting QE with structural shorts, has a poor survival rate.
Why it matters
It stops hero trades against a reaction function that still has unused tools.
Case
Shorting the rally after March 23 2020, or staying long duration into 2022 hikes. Both were fights. One was briefly fashionable; both were expensive.
How to read it
The Fed can be wrong on inflation and still crush you on the path. Separate forecast error from P&L.
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