Usman Salis
⬤ The Federal Reserve's balance sheet is growing again, and it's got people talking about whether we're entering a fresh round of quantitative easing. The balance sheet has begun to tick upward, with charts comparing the current trajectory to the expansion that kicked off in 2020. The similarities between both cycles are hard to ignore.
⬤ Here's what happened last time: when the Fed balance sheet last ballooned, markets didn't immediately take off. Instead, there was a brief downturn before things shifted into what became one of the most aggressive bull runs on record. Charts tracking the Fed balance sheet against market movements from 2020 to 2021 show how rising liquidity lined up almost perfectly with a massive rally in risk assets.
⬤ The latest data suggests we might be seeing history repeat itself. Analysts expect a potential short-term dip before any sustained upward move takes hold. Current projections show a possible retracement window followed by an expansion zone, with volatility likely tagging along in the early stages of renewed QE.
Usman Salis
