One tradition the bond and equity markets tend to maintain is the testing of the resolve of a new Fed chairman relatively early in the first term.  Normally, there is a little bit of a honeymoon period, but current circumstances appear to have accelerated things.

The spike in volatility and the crisis in Emerging Markets were not enough at this point to get a reaction from the Fed yesterday during their every-six-weeks FOMC meeting.  Even though Janet Yellen did not interfere with the current QE Taper schedule, we still don’t know for sure whether there will, or will not be, a “Yellen Put”, just as there was a “Bernanke Put” and a “Greenspan Put.”

The markets have become accustomed to dovish central bankers coming to the rescue at almost any sign of trouble.  Given Yellen’s past, we know that she is very dovish.  However, she might want to prove that she is a little different that we think.  If the markets sense this, things could get very volatile over the next couple of months to see just how much resolve she has.

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