The US Federal Reserve ended its quantitative tightening (QT) program on Monday, December 1st, suspending it by injecting $13.5 billion into the US banking system by way of in a single day repos.
In keeping with Federal Reserve Financial Information (FRED), that is the second largest injection of liquidity for the reason that COVID-19 period and even exceeds the height of the dot-com bubble.
Consequently, buyers and analysts are questioning whether or not dangerous belongings equivalent to shares and cryptocurrencies can be affected, particularly as liquidity begins to loosen.
Analysts are bullish on cryptocurrencies and shares
Tom Lee of Fundstrat mentioned he stays optimistic about cryptocurrencies and shares, CNBC In an interview, central banks mentioned it will be the most important tailwind within the coming weeks.
“I feel the most important tailwind that may emerge over the following few weeks can be round central banks. The Fed is planning to chop charges in December, however at the moment can also be the top of quantitative tightening. And as you understand, the Fed has been shrinking its steadiness sheet since April 2022, which is a reasonably large tailwind for market liquidity.” mentioned Lee.
With liquidity now not leaving the system, capital flows into dangerous belongings might start to speed up.
“In case you look again on the final time quantitative tightening resulted in September 2012, the market responded very well.” He additional identified:
Will Bitcoin hit an all-time excessive in January?
Lee appeared notably satisfied about Bitcoin (BTC), arguing that larger liquidity has traditionally correlated with higher efficiency for risk-on belongings.
Subsequently, though the results of October’s recession are nonetheless noticeable and the Financial institution of Japan seems to be “hawkish”, he believes a brand new all-time excessive for “digital gold” is feasible by late January. As for the S&P 500 index, he claimed it’s prone to attain 7,200-7,300 in December.
In fact, all eyes can be on the Federal Open Market Committee (FOMC) assembly in December, with markets hoping for readability on the Fed’s future rate-cutting path.
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