Can the Fed Save the Stock Market?

In retrospect, it was ill-timed for the Federal Reserve to start hiking short-term interest rates. But that can easily be fixed.

(Image credit: 2013 Getty Images)

Stocks started off the year hit by a double deflationary whammy—in the oil patch and in China. It’s true that the U.S. is a net importer of energy, and in the long run we will all benefit from a decline in energy prices. But in the short run, the 75% drop in the price of oil, from $108 a barrel in June 2014 to less than $27 earlier this year, has cast doubt on the viability of hundreds of billions of dollars of capital in the energy sector. That investment was based on the assumption that oil would sell for at least $50 to $60 a barrel. Energy firms, especially those with a lot of debt, are already feeling the pain, and bankruptcies are expected to rise.

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Jeremy J. Siegel
Contributing Columnist, Kiplinger's Personal Finance
Siegel is a professor at the University of Pennsylvania's Wharton School and the author of "Stocks For The Long Run" and "The Future For Investors."