Throughout the past several years, we have been in the middle of what is clearly a bull market. However, the year 2015 hasn't quite been as great for the stock market as recent years; and in the past month the Dow Jones Industrial Average has been struggling. Today, we're going to take a look into why the Dow is struggling as well as why I believe we are going to be saying goodbye to long term gains in the index for a little while. So, let's get right to it...

Why The Markets Were Rising In The First Place

As mentioned above, throughout the past several years, the financial markets have been booming; and to understand why the Dow is struggling today, you'll need to have an understanding of what caused the bull market in the first place. It all goes back to 2009. It was in 2009 that the Federal Reserve started a monetary stimulus plan to kick start the US economic recovery from the economic crisis of 2008 and 2009. In an effort to do so, the Federal Reserve started a bond buying program and reduced their interest rates with the understanding that the stimulus would go away when the United States economy was strong enough to stand on its own. In late 2014, quantitative easing (the term for Federal Reserve bond buying) came to an end as markets continually gained strength; however, lower interest rates are still in effect.

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Economic Stimulus Led To A Big Problem

The economic stimulus put in place by the Federal Reserve did exactly what it was expected to do; however, it did it too well. The goal was to kick start economic activity. In doing so, much of the risk involved in investing essentially went away with low interest rates; leading to excessively risky moves from investors. As a result, the stock market values grew exponentially; outpacing consumer spending, earnings reports, and other crucial growth factors. Today, many stocks in the market are dangerously overvalued.

Adding Oil to the Fire

With stocks overpriced at the moment, investors are thinking twice about sending the values of these stocks higher. In the meantime, oil is being added to the flames; making the issue even bigger! The Federal Reserve is expected to increase interest rates by the end of the year. If you ask most economic professionals, this is expected to happen in September. However, this is likely to lead to a major decline in the market.

The bottom line is that thanks to economic stimulus investors are taking risks that they simply wouldn't take under normal circumstances. With that said, when stimulus goes away and the Federal Reserve does increase interest rates, investors are going to be forced to re-balance their portfolios; doing what they can to dial down risk. This means that when interest rates go up, we're most likely to see a sell off; and with the market so excessively overvalued at the moment, it's likely going to be a major sell off; leading to a massive correction in the market.

So, Here's What We Can Expect To See

While there's no doubt that we will see good days in the Dow Jones Industrial Average; I'm expecting to see more bad than good. Ultimately, this will lead to a downtrend overall throughout the next few months. However, when the interest rates are increased in the end of the year, the downtrend will increase in speed; leading to a full-fledged market correction. So, hold onto your hat and get ready for a bumpy ride.

What Do You Think?

Where do you think the Dow Jones Industrial Average is headed and why? Let us know in the comments below!