The Federal Reserve’s (Fed) balance sheet runoff — commonly referred to as quantitative tightening (QT) — is set to conclude on December 1. Since initiating QT, the Fed has reduced its balance sheet by over $2 trillion, largely through the drawdown of its overnight reverse repo program (O/N RRP). However, recent volatility in short-term funding markets prompted the Fed to end the program earlier than anticipated. However, the end of QT doesn’t spell the beginning of quantitative easing (QE). At least not yet.

Looking ahead, the Fed has outlined its strategy for balance sheet management in the New York Fed&r

What Has Separated Winning Stocks From Losing Stocks in Recent Periods?

In a word, risk. High-risk stocks have been in favor with investors in recent periods. One way to measure risk is with market beta, a statistic that indicates how volatile an investment is compared to a market index. In theory, a stock with a beta of 1.5 would have 50% more risk than the market index. Stocks with high betas would be expected to outperform the equity market when the equity market is rising and underperform when the equity market is declining. The last six months have mirrored the last three years, with U.S. equity indexes advancing and the h

The equity market has shown remarkable resilience over the past two weeks despite rising U.S.-China trade tensions, a spike in equity market volatility, and growing credit concerns tied to business development company (BDC) and regional bank lending losses. While these factors have pulled the S&P 500 back from record highs, technical damage at the index level has been rather minimal. The more notable developments have arguably occurred in the money markets.

Last Thursday, for instance, the Federal Reserve’s (Fed) Standing Repo Facility (SRF) was tapped for $8 billion. It was then tapped again for $2 billion on Monday. T

While markets have been focused on the expected trajectory of short-term interest rates through Federal Reserve (Fed) rate cut expectations, the Fed’s balance sheet has recently come into focus as well. In his speech last week, Fed Chair Jerome Powell signaled the central bank may stop shrinking its balance sheet in the coming months to preserve liquidity in overnight funding markets.

The Fed has been reducing its balance sheet by allowing bonds to mature without replacement in an effort to drain excess liquidity from the economy (colloquially called quantitative tightening, or QT). The Fed has shrunk its balance sheet by o