Federal Reserve: Bonds vs. StocksThe Federal Reserve uses Treasury bonds, gold, and notes or notes to support the nation's economy. The Federal Reserve traditionally conducts open market operations through the buying and selling of government bonds. Could the Federal Reserve safely conduct its monetary policy by buying and selling stocks on the New York Stock Exchange? No, I don't think the Federal Reserve could conduct monetary policy by buying and selling stocks on the New York Stock Exchange. Stock values ​​change or affect stock prices simply by the actual actions of purchasing stocks. If the Federal Reserve entered the stock market, then the Federal Reserve would increase the level of demand, and with the increase in demand, prices would increase. The New York Stock Exchange has been a way for many people to make money for decades; However, like anything, the stock market has its ups and downs. The Dow Jones Average of the stock market oscillates daily up and sometimes down, so a link between monetary policy and the stock market would be very interesting and almost devastating. Stock prices are among the most closely watched asset prices in the economy and are considered highly sensitive to economic conditions. Stock prices are also known to fluctuate quite widely, raising concerns about possible bubbles or deviations in stock prices from fundamental values ​​that could have negative implications for the economy. Changes in monetary policy affect the stock market at the time they are announced, but these changes do not have a major influence on stock prices, it is the unanticipated changes in monetary policy that affect stock prices. This affects stock prices not by influencing expected dividends or the real risk-free interest rate, but rather by affecting the perceived risk of stocks. For example, if monetary policy is tightened, investors begin to view stocks as riskier investments and therefore demand a higher return for holding them. To get this higher demand, a drop in the current stock price will need to take place. Higher interest rates cause stock prices to fall or depress. This happens because to maintain the value of future dividends, an investor must discount them to the present, because higher interest rates make a given future dividend less valuable in today's dollar (lower interest rates higher values ​​reduce the value of a stock).).