The mistakes of monetary policy and their impact on the stock market - A financial expert warns of repeated mistakes by the Fed

The mistakes of monetary policy and their impact on the stock market - A financial expert warns of repeated mistakes by the Fed

According to a report by www.faz.net The stock market estimates massive interest rate cuts for the coming year. This expectation leads to speculation about a new boom, especially in the stock market. Moderate growth, moderate inflation and moderate unemployment are expected.

As a financial professional, it is important to consider the history of the stock market and the actions of the Federal Reserve. William McChesney Martin Jr., former US central bank governor until 1970, was responsible for the monetary policy of the time and its mistakes. At that time, the stock market, like the US Federal Reserve, believed that it had inflation and the economy under control, but this had fatal consequences.

Benjamin Bente from Vates Invest, an asset manager with a historical macroeconomic approach, warns against making the same mistake as at the end of the 1960s. This mistake contributed significantly to the 1970s being bad for the stock market and the economy. Bente emphasizes that fundamental macroeconomic mechanisms always apply and that there is no “this time is different” approach.

The expectation of massive interest rate cuts and the resulting speculation can lead to a rapid and significant increase in stock prices. However, there is also the risk of bubble formation and a subsequent correction in the market. It is therefore crucial that central banks carefully consider their policies and pay attention to past mistakes in order to avoid negative effects on the market and the financial sector.