It was a heckuva party and now the hangover has set in. The S&P 500 stock index is down about 20 percent from its pandemic high. The NASDAQ Composite has shrunk by almost a third from its high in November.
Investors have realized the Federal Reserve will not be rescuing them from this downdraft in equity and fixed income prices. In fact, some will argue, it’s the Central Bank that is a central contributor to the bear market ripping through stock and bond portfolios this year.
The potent monetary stimulus brewed up by the Fed in the first year of the pandemic saved the economy, helped fuel a roaring bull market, and contributed to today’s generational-high inflation. So, the Fed has been left with no choice but to shift course to sedate inflation. The effect has been a sobering reminder that stock and bond prices can move down, and fast, and fall further.
