*Paul's Transformation: Ending Quantitative Tightening Could Be a Warning Sign, Not a Warning Signal ⚠️💣*
The Federal Reserve has just confirmed the end of Quantitative Tightening (QT) - draining liquidity by trillions of dollars, which has been ongoing since mid-2022. Markets immediately rebounded with this news, and headlines blared: *"Increase in Liquidity!" 💧🚀
But here's what most people won't tell you 👇
Historically, when the Federal Reserve stops quantitative tightening, it doesn't mean everything is fine; it means *there's something wrong*.
📉 *A Reality Check*
-Since 2003:
- During the quantitative easing period: the S&P 500 achieved an average annual gain of +16.9% 🟢
- During the quantitative easing period (when money flows): gains dropped to +10.3% 📉
- Since the start of the quantitative easing period in mid-2022, the Federal Reserve has drained $2.2 trillion, yet the S&P 500 has risen by 20.9%.
*Why?*
Because the Federal Reserve *tightens its monetary policy only when the economy is strong.*
And *eases it* - as is the case now - when problems loom.
Quantitative easing is not inherently bullish - it is usually a rescue operation.
🎯 The Key Question: *What is forcing the Federal Reserve to change course now?*
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