Turns Out Even Jerome Powell Can Struggle To Pick Tops And Bottoms

Turns Out Even Jerome Powell Can Struggle To Pick Tops And Bottoms
Andrew Rummer

over 2 years ago1 min

Timing when to get in or out of a certain trade is one of the hardest parts of active investing. Everyone’s looking to buy low and sell high, of course, but it’s far easier said than done.

So it may come as a reassuring surprise that even the chair of the US Federal Reserve (the Fed) appears to have sold a large chunk of stocks far too early last year – despite his intimate knowledge of the economy.

According to a report in The American Prospect, Jerome Powell sold between $1 million and $5 million in stock on Oct. 1 last year, by offloading shares in Vanguard’s Total Stock Market Index Fund. Yet, as the chart above of the Vanguard fund’s performance shows, by selling when he did, Powell missed out on a 35% gain – worth up to $1.75 million. 

Beyond this diverting tale of a very wealthy man failing to become even wealthier, the aggressive way in which some media outlets are reporting this story may have serious repercussions for Powell and the US economy he helps oversee. 

According to betting markets, Powell's chance of keeping his job when his term expires early next year has dropped to about 65%, from as high as 90% in September. With all the power the Fed chair has to affect the global economy and markets, a new broom could throw a curveball at investors. 

Odds of becoming the Fed’s next chair
Odds of becoming the Fed’s next chair
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