Kevin Warsh has assumed the role of Federal Reserve chair, succeeding Jerome Powell, and he intends to significantly shrink the Fed's $6.7 trillion balance sheet.This is a major departure from the past 15 years, during which quantitative easing helped propel the S&P 500 to record highs.

Warsh argues that the Fed's large balance sheet disproportionately benefits those with financial assets and wants to rely more on interest rates than direct market interventions.

If he succeeds, bond prices could fall while yields rise, increasing borrowing costs for companies and potentially impacting stock valuations, especially for high-growth tech companies that benefited from low discount rates.

Investors may consider shifting toward sectors like financials, favoring companies with strong cash flows and balance sheets, and moving to shorter-duration bonds to mitigate risk.Warsh's approach could also challenge the psychological 'Fed put,' where markets have expected Fed support during downturns.While the 'Fed put' may not disappear entirely, it could be less immediately accessible, creating a period of market volatility.Maintaining a long-term perspective and keeping some cash ready could help investors navigate the transition without major disruptions.