In the stock market, the new year may start with a bang

In the stock market, the new year may start with a bang

Investors have had to contend with large swings in sentiment this month, capping a year of seesawing risk sentiment.

After big share-price drops in high-growth companies in the late winter and early spring, broad-based buying returned in May and the rest of the summer, followed by more selling starting in late November.

With tumultuous declines in the past month, is this a contrarian “all-clear” signal for further gains? Or, with the Federal Reserve accelerating its tapering of quantitative easing and potentially raising official interest rates in 2022, is this the end of the bull run that started in early 2020?

For answers, we look to the major players: “passive” investors and the Fed.

Passive investors never sell

Passive funds, such as exchange traded funds that invest in the S&P 500 Index SPX, +0.62%, have been gaining market share for decades and are now at a critical mass…

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