As investors focused on interest rates, the Fed quietly trimmed its massive balance sheet — selling and redeeming assets accumulated over the past 5 years. 💼
In October, total assets dropped to $6.6T, down from the $9T peak in early 2022 — bringing it back to April 2020 levels when adjusted for GDP. 🛡
For context:
Fed assets = 22% of GDP (lowest among major economies)
Bank of England ≈ 25%
China ≈ 34%
ECB ≈ 40%
Japan ≈ 110% ⚡
💡 Why it matters:
The Fed originally expanded its balance sheet by buying government bonds to support banks and stimulate lending. But that excess liquidity inflated prices across assets — from stocks to real estate to crypto. 📈
Now, as the Fed tightens and liquidity fades, pressure on asset prices could follow — though optimism around potential rate cuts is keeping markets upbeat for now. ⚡