"Strategic ambiguity" and "data-driven"! Is Walsh trying to become Greenspan? Then should we learn the "put option"?

Federal Reserve Chairman Kevin Warsh has elevated Alan Greenspan as a benchmark for his policy approach, frequently citing Greenspan's philosophy during his inauguration and first press conference, and actively positioning himself as an emulator of his monetary policy. Greenspan's passing this week has sparked not only reflections on the legacy of the "maestro" but also a profound debate on whether the Warsh era can replicate his glory and how to avoid his missteps.

At the press conference following the first policy meeting on June 17, Warsh declined to provide any forward guidance and refrained from filling out the "dot plot" of quarterly rate forecasts from officials, explicitly stating that he wants the market to react directly to economic data rather than relying on the Fed's filtered projections. He also rejected the traditional narrative of a "cruel choice" between employment and inflation, claiming that low unemployment and steady growth do not need to come at the cost of higher inflation. These statements have led the public to broadly link Warsh's style to Greenspan's "strategic ambiguity" and supply-side thinking.

For the market, this shift in stance is significant. If Warsh successfully replicates the productivity-driven prosperity narrative of the Greenspan era, it could reshape market expectations for the path of interest rate hikes, providing more room for risk asset pricing. During Greenspan's nearly two decades at the helm of the Federal Reserve, the S&P 500 rose a cumulative 290%.

However, analysts also warn that Greenspan's legacy is not without its pitfalls. The so-called "Greenspan put"—the long-held market expectation that the Fed would backstop the stock market—and the historical lesson of low interest rates fueling asset bubbles constitute the most challenging policy issues that Warsh must proactively address.

The Return of "Strategic Ambiguity": Warsh Actively Benchmarks Against Greenspan

Greenspan passed away this week at the age of 100. He led the Federal Reserve for nearly two decades (1987-2006), spanning major market events such as the 1987 stock market crash, the 1994 Mexican peso crisis, the 1998 collapse of Long-Term Capital Management, and the bursting of the dot-com bubble in 2000. With his flexible and astute policy approach, he earned the title of "maestro," achieving above-trend economic growth, strong job growth, and price stability during his tenure.

Warsh frequently cited Greenspan during his inauguration and explicitly praised his monetary policy philosophy at his first press conference on June 17, positioning him as a reference for his own governance. Historically, Greenspan never issued detailed long-term forward guidance, deliberately keeping the market guessing—this is known as "strategic ambiguity."

Warsh is clearly emulating this: the latest Fed meeting statement did not include any forward guidance, and Warsh himself refused to fill out the "dot plot" forecasts, explicitly stating that he wants the market to react directly to economic data rather than receiving signals filtered through the predictions of Fed governors.

On a rule-based level, Greenspan, along with fellow governors at the time, used real-time market prices such as industrial and agricultural commodity prices, the yield curve, the dollar exchange rate, and gold prices as policy anchors. Warsh has consistently advocated for more rule-based and less discretionary policy, and is expected to adopt a similar framework to some extent.

Data-Driven and Supply-Side Thinking: High Alignment in Policy Philosophy

Greenspan was a pioneer of data-driven decision-making at the Fed. Before his tenure, the Fed's policy framework was far less quantitative than it is today. Drawing on his experience as a former economic advisor, Greenspan established a tradition of referencing a wide range of multidimensional data, a practice that subsequent chairs have continued.

However, Greenspan's flexibility went beyond simple data tracking. While he largely adhered to an informal 2% inflation target, he did not dogmatically prioritize the "sacredness" of this target. Instead, he broadly focused on labor market, wage, growth, and business data. This discretionary judgment was key to the Fed's ability to fulfill its dual mandate during periods of stress.

The two are highly aligned in their assessment of the "Phillips Curve." In speeches and congressional testimonies during the late 1990s, Greenspan repeatedly pointed out that structural changes such as productivity gains had rendered the theory obsolete, rejecting the attribution of inflation to demand overheating and instead focusing on supply-side expansion. Warsh explicitly rejected the notion of a "cruel choice" between employment and inflation at the June press conference, emphasizing that appropriate monetary policy can allow low unemployment and steady growth to coexist without necessarily triggering inflation—a stance consistent with Greenspan's supply-side logic.

Productivity is the core pillar of this policy framework. As noted in a Barron's commentary, U.S. productivity growth year-over-year had risen to 2.8% in the first quarter of 2026, significantly above the post-financial crisis average of about 1.4%, reminiscent of the late 1990s when technology-driven innovation pushed productivity growth above 2.5%.

Historical experience shows that strong productivity gains often go hand in hand with robust stock market returns—this is a key support for Warsh's pursuit of the "low inflation, high growth, low unemployment" trifecta.

Ideological Blind Spots: The Other Side of Greenspan's Legacy

Greenspan's failures are equally undeniable. His near-dogmatic belief in free markets created blind spots in his data focus—his adept handling of firm-level micro data masked a lack of rigorous macroeconomic analysis and prevented him from fully recognizing the risks of unstable credit conditions and the accumulation of financial imbalances.

The consequences were clear: low interest rates fueled cheap credit, and as BIS advisor William White predicted, eventually led to large bubbles during the global financial crisis. Global imbalances also contributed to the industrial shocks of the early 2000s, severely damaging the overall U.S. manufacturing sector.

The Financial Times warns Warsh that if he reverts to last year's dovish stance, he must broaden his risk perspective beyond inflation when considering expansionary policies. "He should not take a dogmatic stance on market issues, nor should he be seduced by the 'golden calf' of Wall Street and Silicon Valley."

The "Greenspan Put": The Most Troublesome Legacy

Perhaps the most complex legacy of Greenspan's tenure is the so-called "Greenspan put"—the long-held market expectation that "the Fed will backstop the U.S. stock market." This perception has persisted in various forms after the Greenspan era and could have dangerous consequences even if the Fed chair himself does not hold this view.

Against the backdrop of already exuberant market sentiment, allowing this "bailout illusion" to persist would further encourage excessive risk-taking. The Financial Times suggests that Warsh should work early to dispel this expectation: this does not mean ignoring stock market reactions, but rather trying to dissuade the market from believing that the Fed views equity levels as a policy target.

"Greenspan verbally embraced free-market ideals, but the new Fed chair must show a commitment to Greenspan's words, not his actions." For Warsh, the most worthy part of Greenspan's legacy to emulate is data-driven flexible decision-making and resistance to dogma; the part most in need of deliberate avoidance is the tendency to take stock market levels as a policy target.

Risk Disclaimer and Terms

        Market risk exists, and investments require caution. This article does not constitute personal investment advice, nor does it consider the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article fit their particular circumstances. Investment decisions are made at one's own risk.