Fed Warned: Uncertainty is the New Threat in the Markets

Key Highlights from the Fed's Financial Stability Report

The Federal Reserve (Fed) announced in its November Financial Stability Report that policy uncertainty is the most significant risk facing the American financial system. The Fed emphasized that among these uncertainties are geopolitical risks, rising long-term interest rates, ongoing inflation, and the potential impacts of changes in perceptions regarding artificial intelligence.

Policy Uncertainty and Markets

The report noted that participants continued to express concerns about trade policy, central bank independence, and the accuracy of economic data. In this context, it was highlighted that the unease created by policy uncertainty could lead to fluctuations in asset prices. The potential for economic uncertainties to disrupt market dynamics stands out as a critical point of focus for analysts.

Effects of Geopolitical Risks

Participants indicated that they continue to observe the potential for escalation of current geopolitical tensions. The ongoing inflation rates posing a persistent threat to financial stability is a particularly noteworthy situation, especially when combined with a weakening labor market.

Changes in Perception of Artificial Intelligence and Risky Assets

The impact of artificial intelligence on stock performance has recently become a major topic of discussion. The Fed's report states that changes in perceptions in this area could lead to corrections in risky assets. If these corrections are significant enough, they could result in further slowdowns in the labor market and tightening of financial conditions. This situation has been recorded as an important development for investors to pay attention to.