Investors Just Got a Reality Check From Fed Chair Kevin Warsh. History Says This 1 Move Is Crucial Right Now.
Inflation is still happening, and that makes some investments a lot less desirable over time.
Overview
The new Federal Reserve Chair Kevin Warsh gave investors a stern warning on Aug. 28 at a symposium in Jackson Hole, stating that "price stability is not self-executing, nor is inflation necessarily mean-reverting." In doing so, he dumped a bucket of cold water onto the market, dispelling some illusions about the Fed's commitment to controlling inflation by increasing the federal funds rate. Since then, the S&P 500 (SNPINDEX: ^GSPC) has been flat, awaiting the central bank's next decision on whether or not to hike rates, which we'll know on Sept. 16; right now a hike looks like the most likely outcome.
Rate hikes could pose a bit of a problem for the nearly $8 trillion that's parked in U.S. money market funds as of Sept. 10. Nearly all investors use such funds, and history says that there's one move in particular that's crucial to do if you're one of them.
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Originally published at www.fool.com.