Wall Street is getting very hard to figure out these days.

A sharp upturn in one week is followed by a sharp downturn next week. Then, it is succeeded by another upturn the week after. Sometimes, these market reversals occur within the same week or even within the same day.

What's behind this heightened volatility on Wall Street?

Is it a sign of another boom or another bust?

Don Kaufman, the co-founder of TheoTrade's Insight, attributed the heightened volatility on Wall Street to the dramatic shift in the Federal Reserve's policy.

"Over the past couple of years, there have been significant melt-ups in the market, largely driven by Federal Reserve policy and stimulus," Kaufman told International Business Times. "As the Fed is in the process of quantitative tightening and rising interest rates, volatility has come back. Currently, we're experiencing wild swings up and down in equity indices. That volatility is reflected in the VIX as it's remained elevated above 20 for most of 2022."

With the Fed taking liquidity out of the economy, the money available to purchase risky assets becomes tight, meaning that investors must sell one asset to raise cash to buy another, which increases market volatility.

What does the return of volatility mean for the direction of Wall Street?

It depends on whether equity markets have a good knowledge of the Fed's tightening cycle and have fully discounted it. That, in turn, depends on whether inflation has already reached its peak. If the answer is yes, Wall Street could be in for another boom. Wall Street could be in for another bust if the answer is no.

Rapid Ratings CEO James Gellert has kept an eye on the dangers of inflation, rising interest rates and supply chain disruptions for businesses with large corporate debt. He is concerned about a "massive wall" of corporate debt coming due in 2023, which could fuel a "perfect macroeconomic storm."

"Take, for example, the typical supplier of a Fortune 500 company: a small, privately held company managing a decent amount of financial risk, thanks to heavy debt loads, minimal access to capital and reliance on perhaps only a few major clients," Gellert told IBT. "With the onset of this perfect storm, these companies don't have much time to change course. Central bankers are already continuing to raise rates, which will balloon the cost of their interest payments.

"And because of inflationary conditions, these suppliers are also spending more of their limited capital to keep the lights on. Financial risk is at the core of the current supply chain crisis. If large companies don't take steps to mitigate these challenges in their supply chains, the crisis will continue to deepen before it improves."

The supply chain crisis could turn into a financial crisis.

In the end, we'll know where that could drive Wall Street: a wave of defaults that could lead to a bust that parallels the 2008-09 bust.

The critical question in this scenario is whether the Fed has enough bullets to turn the bust into a boom this time around.