Monetary policy makers have bent over backwards since the financial crisis to support financial markets. Put differently, they effectively have been handing out trophies to any and all investors for doing nothing more than simply participating in the stock market. Picked the lousy stock of a lousy company? No worries, the broader market will carry you higher. And what a smart and successful investor you have been. Great job! So what does the Federal Reserve have to show for its efforts during the post crisis period other than an economy that continues to sputter nearly a decade on? It has effectively created a generation of delusional, overconfident investors that believe that stock prices will never go down for any length of time and have unrealistic expectations about what stocks will do in the future. While this had made for a whole lot of stock market fun over the last several years, it is also likely to result in some potentially unforgiving consequences for these investors along with the broader market once reality finally returns.
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