Who's afraid of the Big Bad Fed?

Federal Reserve Chairman Jerome Powell speaks during a Senate Banking Committee hearing on Capitol Hill in Washington, Tuesday, Nov. 30, 2021. (AP Photo/Andrew Harnik)

Stocks had a bit of a rocky time last week, reacting to the release of minutes from the meeting of the Federal Reserve, which hinted at somewhat more aggressive action to fight inflation.

Given the recent surge in prices, the Fed now sees the need to reduce the unprecedented emergency stimulus that helped the U.S. economy through the pandemic. The central bank will reduce the rate at which it buys Treasury and mortgage-backed bonds and looks set to begin hiking the benchmark interest rate by early Spring. While the move was widely anticipated and viewed as overdue by many economists, stock investors responded to Pavlov's bell by hitting the "sell" button. Were they right to do so? Or is this an overreaction?

Wall Street has harbored an unhealthy obsession with the Fed going back to the late 1980s under the leadership of Alan Greenspan.