Why “quantitative tightening” is the wild card that can lower the stock market

Quantitative monetary easing is credited with boosting stock market returns and boosting other speculative asset values ​​by flooding markets with liquidity as the Federal Reserve snapped up trillions of dollars in bonds during both the 2008 financial crisis and especially the 2020 coronavirus pandemic. Investors and policymakers may underestimate what happens when the tide goes out.

“I don’t know if the Fed or anyone else really understands the impact of QT yet,” said Aidan Garrib, head of global macro strategy and…