#trumptariffs The Federal Reserve has officially ended Quantitative Tightening (QT), marking a pivotal shift in monetary policy. The scale of the tightening cycle was historic, but the lingering liquidity remains a critical market factor.
The QT Scorecard
Last Month: $37 billion removed from the balance sheet.
Total Reduction: $2.4 trillion slashed over the entire cycle.
Current Balance Sheet: Down to $6.5 trillion—the lowest level since April 2020.
The "Liquidity Bomb"
Despite these aggressive reductions, a massive liquidity overhang persists. Of the $4.8 trillion in emergency stimulus injected during 2020–2021:
🔴 Only 51% has been withdrawn.
🔴 Nearly half (~$2.4 trillion) remains circulating in the financial system.
Market Implications
This residual liquidity changes the game for asset classes:
Elevated Asset Prices: Excess capital continues to chase assets, potentially supporting valuations in stocks and crypto.
Inflation Persistence: With trillions still in the system, inflation risks may not be fully extinguished.
Volatility: As the Fed pivots away from tightening while massive liquidity remains, markets could experience sharp, unpredictable moves.
This transition signals the end of one monetary era and the start of a volatile new phase where leftover stimulus interacts with evolving economic conditions. Traders in equities, Bitcoin , and gold should prepare for continued turbulence.$
