It's not just about interest rate cuts, Wall Street also expects the Fed to stop shrinking its balance sheet.
In the face of the complex economic situation in the USA, it is worth paying attention to how much pressure the balance sheet of the Federal Reserve can bear as it shrinks, and the upcoming interest rate cuts may also have a reverse effect on reducing the balance sheet.
Will the financial market welcome a "heavy bullish"? The Federal Reserve may end this round of asset reduction by the end of this year.
Since June 2022, the Federal Reserve began implementing quantitative tightening policy, known as shrinking its balance sheet (QT); some Wall Street strategists have said that even though the pace of the balance sheet reduction has slowed recently, it is unlikely that a sudden announcement to end the balance sheet reduction will be made.
Morgan Stanley: The lack of "urgency" by the Fed will lead to more risks for the US stock market.
Dubravko Lakos-Bujas, JPMorgan's new head of market strategy, wrote in his first report that the recent collapse of the US stock market has dissipated some of the bubbles in the market, but if economic growth continues to slow down and the Fed does not show urgency in monetary easing, then holding positions and valuations still face risks.
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