'This will come home to roost': Warning investors not prepared for QT impact

Started in October 2017

Industry commentators have warned there is "huge complacency" throughout markets about the withdrawal of global liquidity through quantitative tightening (QT) with some predicting the market reaction will lead to central banks once again loosening conditions later this year.

The QT process began in October 2017 when the Federal Reserve announced it would start reducing its "gigantic" $4.5trn balance sheet. This significant moment started the reversal of the quantitative easing (QE) process, which central banks implemented amid the Global Financial Crisis to support markets and prevent the collapse of the financial system. As a side-effect, QE has created distortions in the market by holding up asset prices, helping to extend the multi-decade bull market in bonds and dampening volatility, while at the same time increasing the amount of debt in the system. ...