The other day Stock Board Asset Macro Research’s Alastair Williamson tweeted the following chart with the accompanying comment, “The entire world is burning, and America is holding on by a thread.“

It’s a great table for it shows that both bonds and stocks around the world have suffered this year with almost no financial asset class posting positive returns. Brazilian and American stocks, along with Chinese 10-year bonds, were the only ones that could muster a return with a plus at the front. And even those returns were anemic.

So what gives? Why the terrible year for financial markets?

It’s easy – the Fed.

The Federal Reserve is the global central banker to the world. They might not like it. They might wish it different, but it is what it is.

For the past three years the Federal Reserve has been slowly tightening monetary policy through two methods – a methodical steady raising of the Fed Funds rate along with a systematic winding down of their balance sheet. It was like a game of musical chairs with the Federal Reserve taking away a chair at every other meeting.

Many market commentators mistakenly believed the U.S. economy impervious to this monetary tightening. Some others argued the higher real rates attracted capital and caused a counter intuitive pro-economic response.

Well, I don’t buy any of that for one second.

The reality is that the world (including the U.S.) has never been so indebted. Reducing liquidity through tighter monetary policy of the global reserve currency will have an outsized economic and market reaction due to this large amount of debt.

So when I look at Alastair’s table, I think it is easy to explain. The Federal Reserve has caused both a global economic slowdown along with a bear market in most financial assets.

Although many argue the Federal Reserve’s rate tightening campaign has so far been shallow and in the early innings, they are missing that when the Fed approached the zero bound, instead of sending rates to negative levels, they engaged in massive quantitative easing. This was monetary accommodation and although it didn’t send rates below zero, academics have created a method of measuring the “equivalent” rate. This is known as the Wu-Xia Shadow Rate. I have long argued that although the first rate hike was in late 2015, monetary policy had been tightening since the Federal Reserve started tapering their quantitative easing.