Surprise

What may surprise you is that one of the reasons there will
certainly be future bubbles is that the Federal Reserve has done
such a good job of taming inflation and stabilizing the economy.
That environment, as it happens, is a perfect petri dish for the
kind of speculation that gives rise to financial bubbles. That’s one
of the unexpected downsides of the victory over inflation.
The Federal Reserve’s success on inflation is also a reason that
returns have shrunk in both the stock and bond markets. As the
Fed was winning the fight against inflation, it provided a one-time
opportunity for big returns in the bond market as interest rates
adjusted to new lower levels. There were even bigger returns in
the stock market as the prospect of declining inflation raised the
value of future equity earnings in line with falling interest rates,
and then some.