Embrace Asymmetry: Fed's Dual Response to Market Fluctuations

The Federal Reserve adopted a significant shift in philosophy regarding market interventions following the introduction of the 'Greenspan put.' This approach entailed a reactive stance where the Fed remained passive during market upswings but was proactive in curbing declines to prevent severe economic downturns reminiscent of the Great Depression. This asymmetrical response was rooted in historical fears of a stock market crash leading to economic catastrophe. The Fed's consistent intervention during downturns aimed to stabilize the market and avoid catastrophic economic fallout, marking a transformative shift in its role in financial markets.