Next stock market crash: How the Fed will cause the next big meltdown

Paulo
Whitaker/Reuters

• The Federal Reserve has underpinned stock market gains
  throughout the 9-1/2-year bull market by keeping lending
  conditions highly accommodative.
• Barry Bannister, the chief equity strategist at Stifel,
  sees this becoming problematic for stocks as the Fed adopts a
  tighter monetary policy.
• He lays out a scenario in which future Fed decisions
  regarding interest-rate hikes create the next big equity
  meltdown.

When it comes to the 9-1/2-year bull market, stock enthusiasts are
quick to highlight the strong corporate profit growth that has
led the way higher.

But what helped catalyze such impressive earnings expansion? Why,
the Federal Reserve‘s historically
easy monetary policy, of course.

That’s the premise of Stifel’s view that this has been a “policy
bull market,” built on the shoulders of the Fed’s extremely
accommodative lending conditions.

Sure, it’s a cynical way to look at the longest bull run in history.
But Stifel has a point. Back in 2008, when companies were going
bankrupt in droves, the Fed stepped in to suppress bond yields of
all types, forming a market backbone of sorts. …

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