The Fed is the only thing standing in the way of a sustained bull market in stocks
rather than a short-term cyclical bull market. But that can change pretty quickly if the Fed misfires on its interest rate policy.
means that 2022's bear market decline in stocks occurred absent a recession. That fact favors the idea that the current bull market in stocks is more secular in nature than cyclical, according to the note. Highlighting an example of how a policy mistake can come regardless of the direction of rates, NDR pointed out that the implosion of Long-Term Capital Management in 1998 sparked a brief bear market in stocks and led Fed Chairman Alan Greenspan to cut interest rates three times. Stocks took off after that, leading to a bubble.
On the flip side, if inflation lingers and Fed Chairman Jerome Powell aggressively hikes interest rates again, he could plunge the economy into a recession and effectively end the bull market.
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