How the Federal Reserve Could End the Bull Market in Stocks

The Federal Reserve is stuck in a major pickle - and it's not about how many times to raise interest rates this year. The problem stems from years and years of asset purchases - known as quantitative easing. This was a program where the Federal Reserve purchased bonds and mortgage-backed securities from banks in the years following the 2008 financial crisis, hoping banks would use those proceeds to lend money and stimulate the economy. This, along with record low interest rates, was known as the central bank's accommodative policy. Now, the Fed has accumulated some $4.45 trillion of these assets, according to Bloomberg data. Even though the Fed stopped expanding its quantitative easing program toward the end of 2014, its bond purchases are still alive and well. In order to maintain the current size of the balance sheet, when bonds the Fed currently holds mature, the Fed uses those proceeds to purchase new bonds. "The markets are rightfully and remain addicted to that reinvestment," said Danielle DiMartino Booth, author of "Fed Up: An Insider's Take on Why the Federal Reserve is Bad for America."