Is the Fed breathing new life into the bull market?
Wednesday, 27 August 2025, written by Maarten Spek
A bubble is brewing in equity and corporate bond markets. How far it inflates hinges on the battle between looser monetary policy and rising long-term interest rates.
Despite all the economic and political concerns, the trend for equities is upward and that for credit spreads is downward. What are the reasons for this and how long will the markets continue to climb the proverbial “wall of worry”?
Markets act as if tariffs, trade uncertainty, and fiscal worries are in the rear-view mirror, while the windshield shows fiscal easing, Fed rate cuts, and AI-driven profits. We disagree, expecting major obstacles to make the ride bumpy for investors, and position our tactical asset allocation accordingly.
After a V-shaped recovery, will major stock markets climb a 'wall of worry' as in 2021, or are we on the brink of a 2000-2001-style decline? We explore whether long-term rates will hit new highs and how this shapes tactical asset allocation.
