Every day can bring a surprise for investors, often from a little-followed source or unexpected direction. We saw one recently.

A hedge fund unknown to all but a few on Wall Street found itself on the wrong side of some trades, mostly in Chinese tech stocks and a few U.S. issues. That triggered a huge margin call (at least $35 billion). Stocks were sold in a fire sale and Nomura Securities and Credit Suisse were stung with losses in the billions. Why they held insufficient collateral to accommodate such a large margin call is beyond me.

There have been out-of-the-blue events in the past. The collapse of hedge fund Long Term Capital Management in the 1990s triggered a major sell-off. So did the failure of Lehman Brothers in 2008. There was the 1987 crash, Soviet-era debt default and dot-com collapse in 2000. We had flash crashes, too. Then came COVID. In all cases we managed. There were bigger issues then, there are now.

Stock investors were not rattled. Nothing to see here folks, move along. In fact, when brokers were selling billions in stocks the Dow was rising almost 500 points and the market has rallied since.

The combination of massive federal spending and Federal Reserve actions makes for a powerful tailwind, especially given the unattractive alternatives. Add in rapid GDP and earnings growth and you have an ongoing bull market and higher prices. What could end it? Rising inflation and much higher interest rates? A massive and counter-productive tax increase? All possible. I put inflation at the top of the list because it would undermine all aspects of the economy and financial markets.

About the economy. Thanks to the vaccine, pent-up demand and re-opening in many states growth is accelerating. The bond market is taking the good economic data in stride even though investors know there is upward pressure coming as credit demands rise. Income vehicles that are sensitive to the economy, like junk bonds and business development companies, are doing best.

The key question: Will the good news on the economic front and rising commodity prices shake the Fed’s resolve to keep rates near zero? I suspect that after a few more strong jobs reports the Fed will “hint” that its $180 billion-a-month purchases of Treasurys, mortgages and corporate bonds will taper off sooner rather than later. Will that lead to another “taper tantrum” and sell-off like we saw years ago? Maybe, but I bet that investors will be well ahead of the news and not really surprised.

David Vomund is an Incline Village-based Independent Investment Advisor. Information is found at http://www.VomundInvestments.com or by calling 775-832-8555. Clients hold the positions mentioned in this article. Past performance does not guarantee future results. Consult your financial advisor before purchasing any security.