SINGAPORE (Oct 15): A decade since the global financial crisis (GFC), the US equity market is trading at new highs. But some analysts are anticipating a correction driven by the monetary policy tools implemented in the wake of the crisis. In a way, the ultra-loose policies encouraged risk-taking. Easy money, quantitative easing and very low interest rates have led to asset inflation. Meanwhile, the bulk of the liquidity flowed into the equity and debt markets.

“In the aftermath of the GFC, the bond market more than doubled, from US$27 trillion to US$57 trillion [$78.8 trillion]. The banks no longer hold the inventory. Passive investment in ETFs has risen from US$800 billion to US$5 trillion. So, you have this tremendous asset inflation, but market liquidity has dropped,” notes Joyce Chang, head of global research at JPMorgan, in a recent interview.

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