Fed Assets

Down...slightly

The Federal Reserve Bank has a balance sheet. Now, people can tell a complex story about how their interactions with the market drive market behavior but I’m going to explain it in a super simple way. Assets up - good. Assets down - bad.

Here are those assets:

You can see that when COVID hit, the Federal Reserve acted to help markets and the economy by increasing their balance sheet. Assets up. Good.

Now, they are starting to lower their assets. Bad.

But, just slightly…so far. You can see in the chart that the dip is pretty miniscule. Though, think of the slowdown and damage so far on everything. If assets have gone down just a little bit, what will happen when they go down more?

If the Fed is serious, we are going to find out. And, down will be bad.