Excess Returns · Monday, August 31, 2026
The Federal Reserve's move away from forward guidance is expected to increase volatility in the short-term bond and stock markets. This shift means that investors will have less certainty about future Fed actions, leading to more unpredictable market reactions.
“You're going to have less guidance in terms of like really smoothing this out and you're gonna have more volatility.”
“It's going to change the way we've looked at these Fed meetings throughout our career because the vast majority of Fed meetings in our career have been very, very high percentages in terms of what they're going to do and they always did whatever the percentages said.”
“It's just to me is very interesting that that tool, which has been a huge tool for the Fed, this forward guidance tool is not going to be used anymore.”