Institution: Investors may need to prepare for the new era of the Federal Reserve Uncertainty and volatility may worsen

Arif Husain, global fixed income manager at T. Rowe Price, wrote in a report that as the Federal Reserve considers reducing its balance sheet and decreasing forward guidance, investors "may need to prepare for a different management era, characterized by greater uncertainty and less constrained volatility." Asset prices may become more sensitive to economic data and policy trends. "Therefore, strategies that benefited from low volatility in the post-global financial crisis era may face increasing challenges in the coming years"; "We believe that if the Federal Reserve attempts to reduce its balance sheet again, especially after the central bank ends its latest round of quantitative tightening by the end of 2025, it may prompt the market to reassess long-held expectations of decreasing volatility." He wrote that volatility may first appear in the interest rate market, then spread to the credit market, ultimately affecting the stock market.