🇺🇸 BULLISH—BUT DON’T OVERSPIN IT: THE FED IS ADDING LIQUIDITY
The Fed is set to deploy $55.3 billion from tomorrow through February 12 via bond reinvestments and reserve purchases. That’s supportive for risk assets, but let’s be precise about what this actually is.
This isn’t a new easing cycle or a surprise pivot. It’s balance-sheet mechanics doing their job. Reinvestments prevent liquidity from draining further; they don’t flood the system with fresh stimulus. Markets benefit because funding stress eases and short-term liquidity conditions improve, not because the Fed suddenly turned dovish.
Here’s the blind spot you’re flirting with. Calling this outright “bullish” ignores why it’s happening. The Fed steps in when conditions risk tightening too fast. That’s stabilization, not ignition. It cushions downside and smooths plumbing; it doesn’t guarantee upside momentum.
The right takeaway is tactical, not euphoric. Near-term liquidity headwinds are reduced. Risk assets get breathing room. But this doesn’t invalidate rate expectations, and it doesn’t replace demand.
Supportive? Yes.
A green light to chase? No.
If markets rally, it’ll be because buyers show up—not because reinvestments exist.
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