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The third stock market bubble in 100 years could be caused by a "behind-the-curve" Fed.
The S&P 500 is expected to rise 45% by mid-2023 on poor monetary decisions.
The only way to prevent a systemic risk is for the Fed to be more aggressive.
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If the Federal Reserve doesn't quickly lean into a policy stance that ishawkish, the stock market could surge higher.
He believes that the S&P 500 could surge 45% to 6,750 by mid-2023 due to a "behind-the-curve" Fed raising interest rates and ending its monthly bond purchasing program. If the Fed continues to keep interest rates low, the Nasdaq will jump as much as 64% to 25,000.
If the Fed sticks to a policy of higher interest rates to tame inflation, it could avoid sparking a third stock market bubble in a century, but a hiccup in the economy or a resurgence of COVID-19 could derail that path.
"If the past 225 years of history is a guide, populism leads to poor choices and even worse outcomes," he said. The only way to prevent bubbles from bursting is for the Fed to be more cautious.
The Fed is expected to announce a reduction in monthly bond purchases this afternoon, as well as how many interest rate hikes could come next year.
The sideways market returns for investors in the 1930s and 2000s were similar to those after the dot-com bubble if the Fed fails to prevent another bubble in stocks.
A stock market bubble could be sparked by the Fed if a short-term correction in stocks early next year is any indication.
A correction before a bubble is normal. The S&P 500 fell in the third quarter of 1998 before the tech bubble burst. The same thing happened in the 20's, with a -10.7% drop in December of 1928 as rates rose before the 1929 crash.
The company is called Stifel.
Business Insider has an original article.
