Most people don’t think about the Federal Reserve very often, and only a select few contemplate the effects that the U.S. central bank has on investors. But over the past few years, that’s begun to change. Many economists and keen market watchers are making the case that years of loose monetary policies from the Fed and other central banks following the Great Financial Crisis (GFC) helped create an “everything bubble”—and now it’s popping.
The everything bubble idea isn’t new. For years before 2022’s stock market woes, leading minds on Wall Street including the investing legend Jeremy Grantham warned about a brewing “superbubble.” The idea is that near-zero interest rates and quantitative easing (QE)—a policy where the Fed would buy mortgage-backed securities and government bonds to boost lending and investment in the economy—pushed investors toward riskier investments, allowed unsustainable business models to thrive on cheap debt, and fueled a “savagely unhealthy” surge in home prices.
