The Fed and the Financials. Sounds like a rock 'n roll band, doesn't it?

Well, the financial sector has certainly been rocked by all kinds of problems. But most importantly for our purposes, it is now poised to roll going forward – and the Federal Reserve is a big reason why.

A lot of investors are missing this as they associate the Fed only with interest-rate announcements like the one we got this week. (The decision to leave rates unchanged surprised absolutely nobody.)

Here's what you need to know to set yourself up now for second-half profits:

Our financial system has been whacked by two major problems recently: the inconsistency of liquidity and a lack of confidence (for a prime example, see "Lehman Brothers (LEH) Share Price Smack Down.") These two issues are practically ancient history now because the Fed took two steps that have had major positive effects.

First, the Fed has made a point of increasing liquidity. This is where interest rates come in. For a while, the economy was backed up like a clogged kitchen sink—there simply wasn't enough money to go around. The Fed essentially poured financial Drano down the pipes by lowering rates and making it easier for banks to borrow money. As banks lend again, money flow returns to normal and economic activity gets back on track.

The second positive effect is the one people have forgotten about already. The Fed, in one GameChanging move, restored confidence in the financial system by standing behind JP Morgan Chase's (JPM) takeover of troubled Bear Stearns.

As you may recall, the Fed pledged up to $30 billion in support for Bear Stearns' mortgage-backed portfolios. Many viewed this action as controversial, but the Bear Stearns bailout stabilized the financial system in one bold stroke. If Bear Stearns had been allowed to go under...