Fed Abandons Safety Net, Sending Rate-Sensitive Stocks into Turmoil

The Federal Reserve's new chairman, Kevin Warsh, is taking a more hands-off approach to monetary policy, rejecting any soft inflation goal and sticking to its target of 2%.

This marks a departure from the past practice of providing guidance to investors, known as the 'Fed put', which was seen as a safety net in times of economic uncertainty.

The absence of this guidance has led to rising rates and increased market volatility, with bond yields rising without any intervention from the Fed.

Rising rates have an immediate impact on rate-sensitive stocks, increasing borrowing costs and affecting companies that rely heavily on debt, such as real estate investment trusts (REITs).

However, higher rates also mean banks like JPMorgan Chase can charge more on loans, boosting net interest income and profits.