What Happens When the Fed Balance Sheet Expands?

Strong positive relationship. Every major QE has coincided with equity rallies.

Bitcoin is highly sensitive to liquidity expansion. Major bull runs have coincided with QE.

Gold rallies on debasement fears and lower real yields. 15-40% gains common during QE.

Dollar weakens structurally during QE. DXY typically falls 5-15%.

HY spreads compress as funding conditions ease.

Tech, growth, and long-duration bonds outperform.

When the Fed Balance Sheet Expands, HY Credit Spread (OAS) typically responds to the changing macro environment. ICE BofA High Yield Option-Adjusted Spread, the market's price of default risk. This scenario is particularly relevant for credit & financial stress because changes in Fed Balance Sheet directly influence the macro environment for HY Credit Spread (OAS). Investors should monitor both the trigger condition and HY Credit Spread (OAS)'s response to position accordingly.

When the Fed Balance Sheet Expands, IG Credit Spread (OAS) typically responds to the changing macro environment. ICE BofA Investment Grade OAS, credit stress in high-quality corporate bonds. This scenario is particularly relevant for credit & financial stress because changes in Fed Balance Sheet directly influence the macro environment for IG Credit Spread (OAS). Investors should monitor both the trigger condition and IG Credit Spread (OAS)'s response to position accordingly.

When the Fed Balance Sheet Expands, HY Effective Yield typically responds to the changing macro environment. HY corporate bond effective yield, total return required by junk bond investors. This scenario is particularly relevant for credit & financial stress because changes in Fed Balance Sheet directly influence the macro environment for HY Effective Yield. Investors should monitor both the trigger condition and HY Effective Yield's response to position accordingly.

When the Fed Balance Sheet Expands, IG Effective Yield typically responds to the changing macro environment. IG corporate bond effective yield, cost of investment-grade corporate borrowing. This scenario is particularly relevant for credit & financial stress because changes in Fed Balance Sheet directly influence the macro environment for IG Effective Yield. Investors should monitor both the trigger condition and IG Effective Yield's response to position accordingly.

When the Fed Balance Sheet Expands, BBB Credit Spread typically responds to the changing macro environment. BBB-rated corporate bond OAS, the lowest rung of investment grade. This scenario is particularly relevant for credit & financial stress because changes in Fed Balance Sheet directly influence the macro environment for BBB Credit Spread. Investors should monitor both the trigger condition and BBB Credit Spread's response to position accordingly.

When the Fed Balance Sheet Expands, AAA Credit Spread typically responds to the changing macro environment. AAA-rated corporate bond OAS, flight-to-quality indicator. This scenario is particularly relevant for credit & financial stress because changes in Fed Balance Sheet directly influence the macro environment for AAA Credit Spread. Investors should monitor both the trigger condition and AAA Credit Spread's response to position accordingly.

When the Fed Balance Sheet Expands, Aaa-10Y Treasury Spread typically responds to the changing macro environment. Moody's Aaa corporate minus 10Y Treasury, credit risk premium for top-rated corporates. This scenario is particularly relevant for credit & financial stress because changes in Fed Balance Sheet directly influence the macro environment for Aaa-10Y Treasury Spread. Investors should monitor both the trigger condition and Aaa-10Y Treasury Spread's response to position accordingly.

When the Fed Balance Sheet Expands, Baa-10Y Treasury Spread typically responds to the changing macro environment. Moody's Baa minus 10Y Treasury, a wider measure of corporate credit risk. This scenario is particularly relevant for credit & financial stress because changes in Fed Balance Sheet directly influence the macro environment for Baa-10Y Treasury Spread. Investors should monitor both the trigger condition and Baa-10Y Treasury Spread's response to position accordingly.

When the Fed Balance Sheet Expands, Financial Conditions (NFCI) typically responds to the changing macro environment. Chicago Fed National Financial Conditions Index, positive = tighter than average. This scenario is particularly relevant for credit & financial stress because changes in Fed Balance Sheet directly influence the macro environment for Financial Conditions (NFCI). Investors should monitor both the trigger condition and Financial Conditions (NFCI)'s response to position accordingly.

When the Fed Balance Sheet Expands, Adjusted NFCI typically responds to the changing macro environment. NFCI adjusted for prevailing economic conditions, isolates financial stress from the cycle. This scenario is particularly relevant for credit & financial stress because changes in Fed Balance Sheet directly influence the macro environment for Adjusted NFCI. Investors should monitor both the trigger condition and Adjusted NFCI's response to position accordingly.

When the Fed Balance Sheet Expands, Financial Stress Index (StL) typically responds to the changing macro environment. St. Louis Fed Financial Stress Index, below zero = below-average stress. This scenario is particularly relevant for credit & financial stress because changes in Fed Balance Sheet directly influence the macro environment for Financial Stress Index (StL). Investors should monitor both the trigger condition and Financial Stress Index (StL)'s response to position accordingly.

When the Fed Balance Sheet Expands, SLOOS: C&I Loan Tightening typically responds to the changing macro environment. Senior Loan Officer Survey, net % of banks tightening standards on C&I loans. This scenario is particularly relevant for credit & financial stress because changes in Fed Balance Sheet directly influence the macro environment for SLOOS: C&I Loan Tightening. Investors should monitor both the trigger condition and SLOOS: C&I Loan Tightening's response to position accordingly.

When the Fed Balance Sheet Expands, SLOOS: Credit Card Tightening typically responds to the changing macro environment. Net % of banks tightening credit card lending standards. This scenario is particularly relevant for credit & financial stress because changes in Fed Balance Sheet directly influence the macro environment for SLOOS: Credit Card Tightening. Investors should monitor both the trigger condition and SLOOS: Credit Card Tightening's response to position accordingly.

When the Fed Balance Sheet Expands, Credit Card Delinquency Rate typically responds to the changing macro environment. Delinquency rate on credit card loans, consumer stress indicator. This scenario is particularly relevant for credit & financial stress because changes in Fed Balance Sheet directly influence the macro environment for Credit Card Delinquency Rate. Investors should monitor both the trigger condition and Credit Card Delinquency Rate's response to position accordingly.

When the Fed Balance Sheet Expands, WTI Crude Oil (FRED) typically responds to shifting demand expectations. West Texas Intermediate crude oil spot price. This scenario is particularly relevant for commodities because changes in Fed Balance Sheet directly influence the macro environment for WTI Crude Oil (FRED). Investors should monitor both the trigger condition and WTI Crude Oil (FRED)'s response to position accordingly.

When the Fed Balance Sheet Expands, Brent Crude Oil (FRED) typically responds to shifting demand expectations. Brent crude oil spot price, the global benchmark. This scenario is particularly relevant for commodities because changes in Fed Balance Sheet directly influence the macro environment for Brent Crude Oil (FRED). Investors should monitor both the trigger condition and Brent Crude Oil (FRED)'s response to position accordingly.

When the Fed Balance Sheet Expands, Henry Hub Natural Gas typically responds to shifting demand expectations. Henry Hub natural gas spot price, US benchmark. This scenario is particularly relevant for commodities because changes in Fed Balance Sheet directly influence the macro environment for Henry Hub Natural Gas. Investors should monitor both the trigger condition and Henry Hub Natural Gas's response to position accordingly.

When the Fed Balance Sheet Expands, Copper Price (Global) typically responds to shifting demand expectations. Global copper price, "Dr. Copper" is a leading economic indicator. This scenario is particularly relevant for commodities because changes in Fed Balance Sheet directly influence the macro environment for Copper Price (Global). Investors should monitor both the trigger condition and Copper Price (Global)'s response to position accordingly.

When the Fed Balance Sheet Expands, Ethereum typically tends to rally on improved liquidity conditions. Ethereum spot price, the leading smart contract platform token. This scenario is particularly relevant for crypto because changes in Fed Balance Sheet directly influence the macro environment for Ethereum. Investors should monitor both the trigger condition and Ethereum's response to position accordingly.

When the Fed Balance Sheet Expands, WTI Crude Oil typically responds to shifting demand expectations. WTI crude oil price from market feeds. This scenario is particularly relevant for commodities because changes in Fed Balance Sheet directly influence the macro environment for WTI Crude Oil. Investors should monitor both the trigger condition and WTI Crude Oil's response to position accordingly.

When the Fed Balance Sheet Expands, Brent Crude Oil typically responds to shifting demand expectations. Brent crude oil price, the global benchmark. This scenario is particularly relevant for commodities because changes in Fed Balance Sheet directly influence the macro environment for Brent Crude Oil. Investors should monitor both the trigger condition and Brent Crude Oil's response to position accordingly.

When the Fed Balance Sheet Expands, Natural Gas typically responds to shifting demand expectations. Natural gas spot price. This scenario is particularly relevant for commodities because changes in Fed Balance Sheet directly influence the macro environment for Natural Gas. Investors should monitor both the trigger condition and Natural Gas's response to position accordingly.

When the Fed Balance Sheet Expands, Dow Jones ETF (DIA) typically tends to rally on improved liquidity conditions. SPDR Dow Jones Industrial Average ETF, tracks the 30 blue-chip Dow components. This scenario is particularly relevant for equity index because changes in Fed Balance Sheet directly influence the macro environment for Dow Jones ETF (DIA). Investors should monitor both the trigger condition and Dow Jones ETF (DIA)'s response to position accordingly.

When the Fed Balance Sheet Expands, Russell 2000 ETF (IWM) typically tends to rally on improved liquidity conditions. iShares Russell 2000 ETF, small-cap equity benchmark. This scenario is particularly relevant for equity index because changes in Fed Balance Sheet directly influence the macro environment for Russell 2000 ETF (IWM). Investors should monitor both the trigger condition and Russell 2000 ETF (IWM)'s response to position accordingly.

When the Fed Balance Sheet Expands, S&P 500 Equal Weight (RSP) typically tends to rally on improved liquidity conditions. Equal-weight S&P 500, measures market breadth vs cap-weighted SPY. This scenario is particularly relevant for equity index because changes in Fed Balance Sheet directly influence the macro environment for S&P 500 Equal Weight (RSP). Investors should monitor both the trigger condition and S&P 500 Equal Weight (RSP)'s response to position accordingly.

When the Fed Balance Sheet Expands, Emerging Markets (EEM) typically tends to rally on improved liquidity conditions. iShares MSCI Emerging Markets ETF. This scenario is particularly relevant for equity index because changes in Fed Balance Sheet directly influence the macro environment for Emerging Markets (EEM). Investors should monitor both the trigger condition and Emerging Markets (EEM)'s response to position accordingly.

When the Fed Balance Sheet Expands, China Large-Cap (FXI) typically tends to rally on improved liquidity conditions. iShares China Large-Cap ETF, proxy for Chinese equity market. This scenario is particularly relevant for equity index because changes in Fed Balance Sheet directly influence the macro environment for China Large-Cap (FXI). Investors should monitor both the trigger condition and China Large-Cap (FXI)'s response to position accordingly.

When the Fed Balance Sheet Expands, EAFE Developed (EFA) typically tends to rally on improved liquidity conditions. iShares MSCI EAFE ETF, developed markets excluding US and Canada. This scenario is particularly relevant for equity index because changes in Fed Balance Sheet directly influence the macro environment for EAFE Developed (EFA). Investors should monitor both the trigger condition and EAFE Developed (EFA)'s response to position accordingly.

When the Fed Balance Sheet Expands, Germany / DAX (EWG) typically tends to rally on improved liquidity conditions. iShares MSCI Germany ETF, proxy for the DAX and German equity market. This scenario is particularly relevant for equity index because changes in Fed Balance Sheet directly influence the macro environment for Germany / DAX (EWG). Investors should monitor both the trigger condition and Germany / DAX (EWG)'s response to position accordingly.

When the Fed Balance Sheet Expands, Japan / Nikkei (EWJ) typically tends to rally on improved liquidity conditions. iShares MSCI Japan ETF, proxy for the Nikkei 225 and Japanese equity market. This scenario is particularly relevant for equity index because changes in Fed Balance Sheet directly influence the macro environment for Japan / Nikkei (EWJ). Investors should monitor both the trigger condition and Japan / Nikkei (EWJ)'s response to position accordingly.

When the Fed Balance Sheet Expands, 20Y+ Treasury (TLT) typically rallies as rate expectations decline. iShares 20+ Year Treasury Bond ETF, long-duration rates proxy. This scenario is particularly relevant for bonds & duration because changes in Fed Balance Sheet directly influence the macro environment for 20Y+ Treasury (TLT). Investors should monitor both the trigger condition and 20Y+ Treasury (TLT)'s response to position accordingly.

When the Fed Balance Sheet Expands, 7-10Y Treasury (IEF) typically rallies as rate expectations decline. iShares 7-10 Year Treasury Bond ETF. This scenario is particularly relevant for bonds & duration because changes in Fed Balance Sheet directly influence the macro environment for 7-10Y Treasury (IEF). Investors should monitor both the trigger condition and 7-10Y Treasury (IEF)'s response to position accordingly.

When the Fed Balance Sheet Expands, 1-3Y Treasury (SHY) typically rallies as rate expectations decline. iShares 1-3 Year Treasury Bond ETF, short duration. This scenario is particularly relevant for bonds & duration because changes in Fed Balance Sheet directly influence the macro environment for 1-3Y Treasury (SHY). Investors should monitor both the trigger condition and 1-3Y Treasury (SHY)'s response to position accordingly.

When the Fed Balance Sheet Expands, IG Credit (LQD) typically responds to the changing macro environment. iShares iBoxx Investment Grade Corporate Bond ETF. This scenario is particularly relevant for credit & financial stress because changes in Fed Balance Sheet directly influence the macro environment for IG Credit (LQD). Investors should monitor both the trigger condition and IG Credit (LQD)'s response to position accordingly.

When the Fed Balance Sheet Expands, TIPS (TIP) typically rallies as rate expectations decline. iShares TIPS Bond ETF, inflation-protected Treasuries. This scenario is particularly relevant for bonds & duration because changes in Fed Balance Sheet directly influence the macro environment for TIPS (TIP). Investors should monitor both the trigger condition and TIPS (TIP)'s response to position accordingly.

When the Fed Balance Sheet Expands, Gold ETF (GLD) typically responds to shifting demand expectations. SPDR Gold Shares, largest gold ETF. This scenario is particularly relevant for commodities because changes in Fed Balance Sheet directly influence the macro environment for Gold ETF (GLD). Investors should monitor both the trigger condition and Gold ETF (GLD)'s response to position accordingly.

When the Fed Balance Sheet Expands, Oil ETF (USO) typically responds to shifting demand expectations. United States Oil Fund, WTI crude oil futures ETF. This scenario is particularly relevant for commodities because changes in Fed Balance Sheet directly influence the macro environment for Oil ETF (USO). Investors should monitor both the trigger condition and Oil ETF (USO)'s response to position accordingly.

When the Fed Balance Sheet Expands, Agriculture ETF (DBA) typically responds to shifting demand expectations. Invesco DB Agriculture Fund, broad agricultural commodities. This scenario is particularly relevant for commodities because changes in Fed Balance Sheet directly influence the macro environment for Agriculture ETF (DBA). Investors should monitor both the trigger condition and Agriculture ETF (DBA)'s response to position accordingly.