Throughout my career, I have been faced with the dumbest smart people. Many times the deeper one looks at something – the more complex the analysis – the obvious is missed.

On 16 December 2015, the Federal Reserve raised the federal funds rate coincident to the time the economy was slowing. Their meeting statement indicated otherwise.

The Committee judges that there has been considerable improvement in labor market conditions this year, and it is reasonably confident that inflation will rise, over the medium term, to its 2 percent objective. Given the economic outlook, and recognizing the time it takes for policy actions to affect future economic outcomes, the Committee decided to raise the target range for the federal funds rate to 1/4 to 1/2 percent.

Did the Fed mean stock market when it concluded that it was time to raise rates? [note the below graph cutoff date was 17 December 2015]

The stock market was showing signs of fatigue in December 2015. How many remember ex-Fed Chairman Bernanke statements on the relationship between the markets and monetary policy. From Fortune:

When Ben Bernanke was the head of the Fed, he used to point to the market as evidence that U.S. central bank’s policies were working. In late 2010, Bernanke wrote in an editorial in The Washington Post that a rise in stock prices was one of the signals that the central bank’s policies had worked “in the past and, so far, looks to be effective again.” In August 2012, Bernanke told interest rate policy makers at the influential Jackson Hole conference that the Fed’s bond purchases, so-called quantitative easing, had directly boosted stock prices. Bernanke said that was “potentially important because stock values affect both consumption and investment decisions.” And in October of the same year, he reiterated his belief that a higher stock market would boost consumer and business spending. All this talk of the stock market led critics to claim that Bernanke was purposefully blowing a bubble in the stock market.