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Federal Reserve Announcement: On October 29, the Federal Reserve confirmed that it will end its quantitative tightening (QT) policy, which has involved reducing its balance sheet by approximately $1.4 trillion since 2022, effectively pulling about $95 billion from the financial system each month. As of December 1, the Fed will reinvest maturing Treasuries and mortgage-backed securities, reversing a cash drain that has weighed on markets.
This policy shift is expected to increase liquidity in U.S. stocks, which could boost investor confidence and stock prices, particularly in higher-risk assets like technology. The decision follows a period where the market has shown resilience despite concerns about bond yields, economic slowdowns, and overvalued tech stocks. Historically, previous pauses from QT have led to bullish moments in financial markets.
The Fed’s move comes at a time when the market appears primed for another growth phase, especially in tech sectors prone to benefiting from increased liquidity, setting the stage for potential gains as interest rates are also expected to decrease.
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