Why Stocks Have Been Falling

In this video, I discuss how the stock market and other risk assets sell off whenever the Federal Reserve tries to shrink its balance sheet. Over the past week, the Fed has continued to increase its holdings of Treasuries, MBS, and corporate bonds, but has eased up on repos and central bank liquidity swaps. The net result has been a slightly shrinking balance sheet.

As a result, the US dollar has strengthened and stocks have moved lower. I expect the Fed to shortly begin growing its balance sheet again, which will be bullish for stocks, Bitcoin, and other risk assets.

Not investment advice! Consult a financial adviser.

What happens when the Fed shrinks its balance sheet:
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Watch the Fed's balance sheet grow:
https://fred.stlouisfed.org/series/WALCL

Fed balance sheet website:
https://www.federalreserve.gov/moneta...

Latest release:
https://www.federalreserve.gov/releas...

Bill Dudley says that Fed balance sheet is headed to $10 trillion this year:
https://www.bloomberg.com/opinion/art...

Matthew Kratter is the author of the Amazon best-seller "A Beginner's Guide to the Stock Market":
https://www.amazon.com/Beginners-Guid...

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#Stocks2020
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