⚠️ THIS IS WHAT MOST PEOPLE OVERLOOK
- According to Milk Road - an analysis channel with 92K followers, When the Fed ends quantitative tightening (QT), it means the Fed stops withdrawing liquidity from the system.
- This does not mean that the Fed is pumping money back in, but it means that the market no longer has to fight against liquidity "headwinds".
- HISTORY SHOWS: WHEN THE FED SWITCHES FROM "TIGHT" TO "NEUTRAL", TWO THINGS TYPICALLY HAPPEN:
1. Downward pressure gradually fades — as liquidity is no longer being withdrawn every day.
2. The next major trend completely depends on whether the Fed pumps liquidity back in or not.
- If the Fed pumps in more liquidity — even in a small amount — the market reacts very quickly. Current data shows this move does not resemble the strong pivot of 2020.
IT RESEMBLES A SMALL DRIP PROCESS, DOING:
- reducing liquidity stress
- stabilizing the financial market
- preparing the groundwork for the next major policy
If in the future the Fed actually launches QE (large-scale bond purchases), then that is when bull cycles usually shift from "gradual increase" to "strong explosion".
IN SUMMARY:
- QT ends = no more headwinds
- QE (if it happens) = tailwinds pushing strongly
That is the current market "setup".
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