What would happen if the Fed shrinks $8.87 trillion balance sheet?
"The balance sheet is substantially larger than it needs to be," Fed Chair Jerome Powell said during a press conference. "There's a substantial amount of shrinkage in the balance sheet that needs to be done."
Source: BofA
According to BofA, during times of QT, history suggests thatstocks>bonds, Value>Growth, large = small.
The sectors which underperformed the index most consistently during historical tightening cycles were bond proxies (Utilities and Real Estate) along with Industrials (all with a 20% hit rate).
Value factors have historically performed best during Fed hiking cycles (shown earlier). And work on Late Cycle regimes suggests that Free Cash Flow to EV was the most alpha-generative factor in Late Cycle periods historically.
Jeff Boyd
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The Fed is tightening and that is bad for US stocks. Some people talk about the fact that the PBOC is loosening being good for Chinese businesses and I'm sure that is true but I have no idea how significant the loosining is or if it impacts Chinese stock values. Any thoughts?
Following the introduction of China's groundbreaking DeepSeek technology, Wall Street giants have revised their investment outlooks for the Chinese market.
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Jeff Boyd : The Fed is tightening and that is bad for US stocks. Some people talk about the fact that the PBOC is loosening being good for Chinese businesses and I'm sure that is true but I have no idea how significant the loosining is or if it impacts Chinese stock values. Any thoughts?