Last week delivered the kind of market turbulence that generates breathless commentary but ultimately rewards those who look beyond the headlines. The S&P 500 fell 2.0% and the NASDAQ dropped 4.6% as a sharp technology sell-off dragged the Magnificent Seven lower. NVIDIA lost 9%, Alphabet fell 8%, while Apple, Amazon and Meta each declined more than 4%. Collectively, the group shed around 6% in five trading sessions.
For advocates of active management, this was a timely reminder of the dangers of passive investing. When the Magnificent Seven accounts for more than a third of the S&P 500 and over 40% of the NASDAQ, concentration risk becomes impossible to ignore.
Elsewhere, SpaceX continued its retreat, falling more than 32% from its IPO peak of $225.64. Geopolitical tensions remained elevated as ceasefires broke down and the Strait of Hormuz stayed volatile amid military exchanges between Iran and the United States. The United Kingdom also lost another Prime Minister, a development unlikely to resonate globally but one that holders of UK government debt will watch with interest.
Amid these headlines, the death of Alan Greenspan on 22 June, aged 100, passed with remarkably little attention. As Federal Reserve Chairman for nearly 19 years under four presidents, Greenspan helped shape modern American capitalism, overseeing one of the longest economic expansions in US history from 1991 to 2001. The New York Times once described him as the “pre-eminent economic policymaker of his time.”
His legacy, however, remains deeply contested. The Financial Crisis Inquiry Commission concluded that his support for financial deregulation and failure to restrain the growth of subprime mortgage lending contributed to the conditions that culminated in the 2008 financial crisis. The so-called “Greenspan Put” entered financial vocabulary as shorthand for the belief that the Federal Reserve would shield markets from significant losses through low interest rates, encouraging excessive risk-taking.
It would be unfair to place the entire crisis at Greenspan’s feet. The failures were systemic, institutional and political. Yet it is difficult to ignore that his policies helped create an economy burdened by debt, leaving his successor, Ben Bernanke, to navigate the worst financial crisis since the Great Depression. Bernanke’s stewardship prevented the collapse of the global financial system under extraordinarily difficult circumstances.
Greenspan’s passing serves as a reminder that interest-rate decisions shape economies over decades, not quarters. Today’s policymakers face different challenges but similar trade-offs.
That brings us to the Federal Reserve’s latest meeting, the first chaired by new Fed Chairman Kevin Warsh. The committee unanimously left the federal funds rate unchanged at 3.50% to 3.75% despite inflation reaching a three-year high of 4.2% in May, driven largely by higher energy prices following the conflict involving Iran.
Warsh also announced the Fed would abandon forward guidance, signalling that policymakers would no longer provide investors with advance indications of future rate decisions. While intended to preserve flexibility, the move raised concerns over reduced transparency in one of the world’s most influential institutions.
More importantly, the committee’s outlook shifted materially. Nine policymakers now expect higher interest rates before year-end, a notable change from March, when none projected further hikes and the committee anticipated a rate cut in 2026. Markets reacted swiftly. Following Warsh’s press conference, traders priced in more than a 90% probability of a rate increase by October, sending the S&P 500 down 1.2% and the NASDAQ 1.3% lower.
President Trump had appointed Warsh hoping for lower borrowing costs, but wartime inflation has complicated that objective. The new chairman begins his tenure under pressure from both markets and politics, while inflation continues to dictate a more cautious course. History suggests those competing forces rarely resolve comfortably.
This is precisely why interest-rate policy deserves the attention of every investor, however dry the subject may seem. The Federal Reserve’s benchmark rate influences borrowing costs across the economy, affecting mortgages, credit cards, business investment, government financing and, ultimately, equity valuations.
Greenspan’s death is therefore more than a historical footnote. It is a reminder that the most consequential events in markets often occur not on trading floors, but in central bank committee rooms. Investors who pay close attention to monetary policy may not find it the most exciting subject, but they are usually far better prepared when its long-term consequences inevitably arrive.
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