Why The Fed Won’t Save You From The Next Bear Market

One of the most comical U.S. stock market events so far in 2014 was the correction that took place not long after the start of the New Year. It wasn’t the fact that stocks dropped by -6% over eight trading days in late January and early February. There’s really nothing funny or even notable about that. Instead, it was the severe investor reaction to what was a generally short and shallow decline in stocks. It spoke volumes about how ill prepared the market is to endure any type of pain. And given the fact that the Fed is unlikely to ride to the rescue with another heaping of stimulus the next time the market falls into a sustained correction, it is worthwhile for investors to begin putting into perspective now what a real stock market correction might actually look like once it arrives.

Please click on the link to read more of my article on Seeking Alpha.

Comments

  1. I sure hope the Fed doesn’t “rescue” us anymore. After all, they’re the reason we’re in this mess.

  2. Hello Thomas – Thanks for your comment and I completely agree. The continuously active intervention by the Fed has amplified the boom bust cycles we have seen in capital markets over the last two decades. Stepping aside and allowing markets to find their true equilibrium would be the best course of action at this point. Thanks again for your comment.

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