Investors Just Got a Blunt Reality Check From Fed Chair Kevin Warsh. Here's What History Says Is Coming Next.
The Federal Reserve's policy is shifting back to what it was before Greenspan and the Great Recession.
Overview
Uncertainty is hard for investors to deal with. And uncertainty is also one of the key issues investors need to address. During recent periods of heightened economic uncertainty, however, the Federal Reserve attempted to soothe investor fears by providing more policy certainty. Kevin Warsh, the new head of the Federal Reserve, thinks things have gone too far. Here's what he's doing about it and what it could mean for Wall Street.
Like so many things in life, the current approach taken by the Federal Reserve didn't emerge from a vacuum. In fact, what existed up until the most recent meetings was created with good intentions. During the dot-com bubble, Alan Greenspan's Fed began offering some guidance in its comments, so the bond and stock markets could be assured there was a backstop. It was an understandable move, given the crashing stock prices at the time.
Image source: The U.S. Federal Reserve.
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Originally published at www.fool.com.