The Federal Reserve suddenly halted its balance sheet reduction, equivalent to urgently "easing" the market. In simple terms, it means that it is no longer pulling as much money out of the market. For the past two years, it has been draining liquidity, tightening global liquidity significantly. Now it has stopped, not because the task is complete, but because it is somewhat unable to continue.

There are two main points:

The economy is struggling a bit, and further withdrawal risks problems;

The banking system is also tight on money, fearing it might cut off liquidity itself.

The more critical hidden issue is U.S. fiscal policy. Continuing to reduce the balance sheet would cause government borrowing costs to soar, putting immense pressure on the Treasury, forcing the Federal Reserve to halt.

What does this mean for the market?

In the short term, it’s a good sign; liquidity pressure is easing, and risk assets can catch their breath. But don’t be too optimistic: the Federal Reserve's "fundamentals" are much stronger now than before the pandemic, and easing at such a high level often means greater volatility.

Moreover, the market is currently in an awkward phase: key economic data releases are delayed, and everyone is essentially "blind guessing" in trading. Therefore, the recent fluctuations in U.S. stocks and cryptocurrencies are not surprising. A key signal:

This action by the Federal Reserve typically indicates that liquidity has bottomed out. The next script is likely that the interest rate cut cycle is approaching.

How will the market move? Remember, the market always reacts in advance. The real turning point often begins before the news is entirely clear. The next month or two will be crucial. #美联储重启降息步伐 #美联储停止缩表