That’s why investors should prepare ahead of time.
Of course, there’s no way to predict exactly what U.S. Federal Reserve Chairman Ben Bernanke will do, but 20 years of experience in global markets suggest he’s considering five alternatives drawn from a rapidly diminishing menu of options:
- Eliminate interest paid on reserves.
- Sell short-term securities while buying longer-term debt.
- Target actual inflation.
- Buy more assets outright in a program that would be somewhat like the $600 billion worth of Treasuries it bought as part of QE2.
- And, finally, it could just do nothing.
That being said, I have a pretty good idea which one of these options Bernanke will choose. But more importantly, I can tell you three moves you can make now to safeguard your investments ahead of time.
Let’s look at the Fed’s options first: