Fed Warned: Uncertainty is the New Threat in the Markets

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 pointed out that among these uncertainties are geopolitical risks, rising long-term interest rates, ongoing inflation, and the potential effects of changes in perceptions of artificial intelligence.

Policy Uncertainty and Markets

In the report, participants continued to express their concerns regarding trade policy, central bank independence, and the accuracy of economic data. In this context, it was emphasized that the unease created by policy uncertainty in the markets 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 noted that they continued to observe the potential for the current geopolitical tensions to expand. The ongoing high inflation rates pose a persistent threat to financial stability, especially when combined with a weakening labor market, which is a noteworthy situation.

Changes in Perceptions of Artificial Intelligence and Risky Assets

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