Here's how the Fed could trigger the next big stock market meltdown
- 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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