New Fed Chair Wary of Subprime, Higher Rates: Prudential Strategist

Newly confirmed Federal Reserve chair Janet Yellen has historically been wary of subprime’s effect on the market and higher rates, a market strategist told attendees at a Prudential press briefing Tuesday.

The first female Fed chair previously distinguished herself at the central bank by issuing distinct warnings about the potential hazard impaired credit assets posed, notes Quincy Krosby, chief market strategist at Prudential Annuities.

“We expect the transition to be smooth,” Krosby says of Yellen’s formal ascension to the post of Fed chair, noting that she has been No. 2 at the Fed for some time.

Stanley Fischer is in line to replace Yellen in the No. 2 post at the Fed, Krosby says.

Krosby believes Yellen will move ahead with plans to gradually reduce long-term rate-lowering Fed purchases of mortgage-backed securities and bonds and says, “We will see the markets pulling back” in response.

The transition to a more normal market will be “rocky,” but this will create opportunities for investors, she says, noting that she believes the “corrections” in the market will be “healthy.”