Tencent Securities News Beijing time on the evening of July 25th news, if the US stock market really has nothing to worry about, it does not matter, because the Federal Reserve this week, in fact, it should be said to be in the rest of the year, may play that key stimulus.

In fact, for the normal eight-year-old bull market, the second longest bull market in history, the only real cause for fear is the Fed's policy mistakes. Specifically, observers worry that the Fed will repeat the mistakes of 1994, when they chose to tighten monetary policy when the economy was still fragile, leading directly to the worst year for the bond market since the 1920s. And Orange County, California went bankrupt.

Although the Fed is not as sharp as it was this time, no one can accurately foresee all the consequences. The point is that the US economy is hardly strong, inflation is almost non-existent, and both the bull market in the stock market and the economic recovery have gone through too many years.

For the Fed, after years of cheap money and massive liquidity, the gradual normalisation of interest rates is a logical choice, but timing is crucial.

"they don't keep enough mobility for themselves, which means it's hard for them to adjust once anything negative happens." "it's always easy to cut interest rates and print money," explains Peter Boockvar, chief market analyst at Lindsey Group. It makes a lot of people feel good. However, determining when to end this is always the most difficult task. "

What investors fear is that the Fed has not solved the problem correctly.

According to a recent survey of BofA Merrill Lynch fund managers, investment experts rank Fed mistakes as their second fear, while the top one is the bond market crash-in fact, the two tend to be entangled with each other.

Since the Fed cut its benchmark interest rate to near zero in response to the financial crisis in the second half of 2008, corporate, government and personal debt has risen sharply. Total non-financial debt rose from $35.1 trillion in 2008 to $47.5 trillion in the first quarter of this year, an increase of nearly 35 per cent, according to the Fed.

"there is no such thing as a free lunch, not to mention the fact that the Fed's own balance sheet has quadrupled during such a long period of zero interest rate policy." Booker said bluntly, "it is impossible for the reversal of the process not to be accompanied by all kinds of chaos."

The days of 1994 were full of chaos and turmoil-the collapse of hedge funds, corporate debt scandals, and all experts constantly warned of the dangers of mistiming in raising interest rates. In Mr Buchwal's view, the Fed's rate-raising cycle started too late, which directly led to the huge risks they now face.

Recently, however, the Fed's words have become dovish. In a recent congressional testimony, Ms. Yellen said the Fed didn't have much to do until policy reached a level that was neither loose nor tighter.

"they need to avoid scaring the market and not taking the market by surprise. They are always afraid of accidents in the market, which will lead to all kinds of collateral damage. " "there is a difference between accidents and mistakes," explains Quincy Krosby, chief market strategist at Prudential Financial. Mistakes are more obvious troubles with systematic colors. "

She added: "if you remember 1994, you will understand that when interest rates go up, something will be destroyed."

Of course, the Fed's challenge is not just about interest rates. After the financial crisis, they launched a quantitative easing program to stimulate the economy and bought large amounts of bonds, inflating the balance sheet to $4.5 trillion today-except for $800 billion. The rest is the product of three rounds of quantitative easing-which they have to deal with.

Crosby believes this is another reason why Yellen and her colleagues on the Federal Open Market Committee must be cautious about austerity. Before Ms Yellen testified, the markets were already worried that the Fed had changed its course, no longer based on economic data, but on schedule.

"the Fed has to deal with Wall Street, and it has to be. They are not working in a vacuum."

Starting Tuesday, the Federal Open Market Committee will hold a two-day meeting. Everyone believes that the meeting will not make a decision to raise interest rates, but there is speculation that the meeting will send a signal that the balance sheet will begin to shrink in September. The committee may set a quota to deduct some of the proceeds from maturing bonds and reinvest only the rest.

Krishna Guha, an economist at Evercore ISI, believes that while inflation is still low, the committee "will not make major adjustments to interest rates at several meetings."

CME Group Inc's market shows that traders now think there is a 48 per cent chance that the Fed will raise interest rates again by the end of the year. (Ferry Green)