The Federal Reserve's new approach to inflation is the most important thing to happen to financial markets since the 1980s, investing legend Bill Miller told clients.
By establishing an average inflation target of 2%, the central bank has signaled to investors that it won't be raising interest rates anytime soon, even if unemployment should drop sharply.
That in turn means that even though stock valuations appear stretched, equities are likely to be a much better option than bonds as the strategy plays out, the head of Miller Value Partners said in a letter distributed last week.
"The markets are, of course, aware of this new policy, but to be aware of it and to have fully discounted it are two different things," he wrote. "I think the change in Fed policy is likely the most significant in over 40 years, and, if sustained, is likely to have dramatic consequences for asset prices."
Miller said the policy will have different benefits across various market sectors.