➡ The Federal Reserve (Fed) has stopped its policy of quantitative tightening (QT), which was reducing the amount of money in the economy. This change, which happened on December 1st, was due to signs that the financial system was running low on reserves, or money banks have on hand. Now, the Fed is likely to start buying assets again to increase these reserves and keep the banking system stable. This isn’t about boosting the economy, but about making sure the financial system works smoothly.
➡ The Federal Reserve (Fed) may need to buy between 20 and 50 billion dollars per month starting in 2026 to keep the financial system stable. This is not to rescue the economy, but to prevent the financial system from breaking down. This action, similar to what happened in 2019, will likely lead to an increase in the Fed’s balance sheet and could boost asset prices. This is not a new economic stimulus, but a measure to maintain the stability of the financial system.
➡ Despite economic instability, assets like tech stocks, gold, and Bitcoin have seen significant growth due to the Federal Reserve’s actions. As the Fed continues to inject money into the system, these assets are expected to rise further. However, fear and misunderstanding can cause investors to miss these opportunities. The only potential threat to this trend is domestic political instability, which could disrupt the economic landscape.

The Fed just ended quantitative tightening. And yes, this is the moment that everything changes. And most people completely missed it, or at least they misunderstand this, because ending QT is not the finish line. It’s actually the trigger. Now, we’ve seen this in 2012, we saw it in 2016, we saw it in 2019, and now it’s happening again. So today, I want to show you with hard numbers, with dates, with charts, exactly what just changed, exactly why it matters, and exactly what happened last time, so you can position yourself ahead of it. And of course, I’m going to tell you the one gray swan risk that I’m watching that could shift the timing.

But first, let’s go right to the moment that this all flipped. All right, so let’s just start with what actually happened, because the timing matters. So if we look back on October 29, after the FOMC meeting, Powell said that the Fed would stop quantitative tightening on December 1st. Now, that was the official plan. On November 12th, New York Fed President John Williams, he confirmed it again. He said the committee had decided to conclude the reduction of securities holdings on December 1st. Now, when you look at the balance sheet, you see why they were done right? Since 2022, the Fed has tightened or reduced total assets from about 8.9 trillion down to roughly 6.6 trillion.

And once December 1 hit, the balance sheet basically flattened, right? The runoff completely stopped right there. But what really caught my attention was what happened immediately after. Because on the same day, December 1st, the Fed came in with about 13 and a half billion in overnight repo operations. Now, this shouldn’t be a big surprise, right? The Fed has been hinting that they’re going to do this for months. We saw Williams talked about repo rates drifting higher, more use of the standing repo facility, and the Fed funds trading near the top of the target range. Now, those are the signs they watch when reserves start getting scarce.

All right? Now, Lori Logan at the Dallas Fed spelled it out even more clearly. What she said was, if repo rates keep rising, the Fed would need to start buying assets again to prevent reserves from falling too far. Now, Powell also said the same thing, right? He said at some point, the balance sheet is going to have to grow again to match the liabilities in the banking system. All right, so when you line it all up, right, the picture becomes pretty clear. It’s pretty simple. They drained around $2.2 trillion in reserves. The reserves got tightened up, right? The market starts signaling, and it started flashing.

And by the time December 1st came around, by the time it arrived, they had to stop the runoff, right? They had to start adding small amounts of liquidity back into the system. All right? Now the reason the Fed stopped QT becomes pretty clear once you see that, right? Once, once you look at what’s happening underneath the surface. So if we go back again to November, the funding markets were already telling you reserves were getting tight. John Williams from the Fed, he actually laid this out on November 7. He said that the decision to end QT on December 1 was based on clear market based signs that reserves had moved down from abundant toward what he called somewhat above ample.

And when you listen to what he listed, it lines up with what we are seeing every day in the data, right? So you had repo rates drifting above the Fed’s own target range. You had more volatility in those rates on certain days and you had banks tapping the standing repo facility more often. Now that’s the kind of activity that usually shows up when the system is running low on reserves, low on liquidity. And if you go back and check the money markets around that same time, you can see it pretty plainly. In mid November, short term rates started trading above the ceiling that the Fed sets.

So it’s usually a sign that liquidity is getting way too scarce inside the system. Now banks also started leaning in. We saw the Fed standing repo facility, which is basically like the backstop when private funding isn’t enough. And there were days where usage hit 15 billion, 20 billion, even 24 billion now by the end of that month. Now we haven’t seen numbers like that since the COVID period. When the banks are pulling that much from the srf, it usually means that they can’t get overnight cash, right? They the cash they need at normal levels in the open market.

Now Lori Logan, who remember, used to run the New York Fed’s entire market market desk, she spelled it out in her Oct. 31 speech. She supported stopping QT and said that if repo rates stayed elevated, the Fed would need to start buying assets again to keep reserves from falling too low. Now when someone like her, right, with her background says that publicly, it tells you the Fed knew they were pushing the system towards its limit. Now Powell had already hinted at the same thing. So in October 29th in his press conference, he said that once QT ended, there would come point where the Fed would have to expand its holdings again, expand its reserves, because reserves needed to grow with the size of the banking system.

Now that’s not about stimulating the economy. That’s just how the Mechanics of the system work. And when you look at all of it, right, if you look at all together, repo rates above the target band, the SRF usage hitting the highest level since the pandemic, Fed officials talking openly about asset purchases. If the pressure continued, it’s pretty obvious why they ended QT on December 1, right? The tightening cycle had run its course. Reserves were getting scarce, and the plumbing was now starting to break. All right, that’s why they had to stop. And when the Fed hits that point, the next phase is usually the same.

Liquidity has to come back in. That’s what they’re trying to fix. All right, so once you understand that, that, you know qt ended on December 1, the next question is, what comes next? And this is where things get interesting, because the Fed’s already told us what the next phase looks like, right? They’re just not calling qe. But the mechanics, they’re the same. And again, I’m not giving you my opinion here. I’m giving you exactly what the Fed said in public speeches. Powell, Williams, Logan, all within the last couple of weeks. So let’s start again. Let’s go back to John Williams, right, from the New York Fed, because he’s the guy who actually oversees the systems plumbing.

So on November 7, he said the next step after stopping QT will be figuring out when reserves hit ample. And once reserves hit that level, he said it will then be time to begin the process of gradual purchases of assets that will maintain an ample level of reserves as the Fed’s other liabilities grow. All right, now that’s his words. Those aren’t my words. He said to begin the process of gradual purchases over time. Now, he added that it won’t be long because repo pressures have already shown reserves slipping down from what he called abundant down to what he called ample.

And then he gave the caveat that they always give that these are the, quote, reserve management purchases, right? They don’t represent a change in monetary policy. But of course, when the Fed is buying Treasuries again, then the balance sheet grows, right? So don’t get caught up in the labels. It doesn’t change the mechanics of what’s going on. Now, Powell said almost the same thing a couple weeks earlier on October 29, he said it’s, quote, essential for reserves to grow to align with the scale of the banking sector and the economy. Now, he also said that the Fed will be augmenting reserves at some point.

And he repeated it the same month, right, Saying that the plan has always been to stop the runoff when reserves got to just above ample and then to grow the balance sheet again as the liabilities start to rise. So now you have the chair, the New York Fed president, both saying the balance sheet will need to expand again. All right, that’s the crux of this, right? That’s the core of what quantitative easing is. And then you have Lori Logan from the Dallas Fed. On October 31, she said that if the recent rise in repo rates isn’t temporary and repo pressures have been climbing, then in her view, the Fed would, quote, need to begin buying assets to keep reserves from falling further.

And again, she said, begin buying assets. And I just want to hit this point home. These aren’t hints, right? They’re telling you what the next step is. Once QT ends up, they’ll hold the balance sheet flat for a little bit and then they’ll start buying T bills. They’ll buy T bills to keep reserves from falling as currency and other liabilities grow. Now, a lot of people have been asking online, like, why is the Fed doing this when the jobs report is good, when inflation isn’t all the way down? This is why. Right? This is why. Because the plumbing is breaking.

And the research shops that model the Fed, like Evercore, for example, they’re already estimating what that looks like in practice. Evercore says that the Fed may have to buy 20 billion to 50 billion per month in early 2026 to keep the system stable. The Financial Times put their number closer to 88 billion per month just to start. But every single estimate, it points in the same direction. Right? The balance sheet is going to start climbing again in 2026. And you can see the early signs already. On the very day that qt ended on December 1, the Fed injected about 13.5 billion into the system through the overnight repo.

Now is 13 billion a lot. Well, per Yahoo Finance, they said, quote, this operation ranks as the second largest single day liquidity intervention since the onset of the COVID 19 pandemic and surpasses the peak levels of repo injections seen during the dot com bubble. So, yeah, if it’s, if it’s like it was during the COVID injection, it’s a lot, right? It’s the direction that really matters, right? QT drained, reserves, QT stopped, now reserves, they’re being added back again. And the important thing that we want to understand here, this is the key, is they’re not doing this again because the economy is crashing.

Right? Williams was explicit about this. He said these purchases do not represent a change in the underlying stance of monetary policy. So this isn’t stimulus, right? This isn’t about rescuing the economy. This is qe. This is to keep the plumbing from breaking. And that’s exactly what we saw in 2019 with the other time they did the non QE. QE, right. The Fed insisted that buying short term bills for reserve management wasn’t qe. But of course the markets understood what it meant. Right? The balance sheet was expanding again. The same dynamic is showing up now and you can call it whatever you want, but it’s the same thing now.

Today you even have mainstream analysts calling out Tom Lee said that the end of QT is essentially QE starting. The economic times flat out called the Fed’s actions stealth easing. And even Ray Dalio, Ray Dalio warned that because the fiscal side is so overstretched, with huge issuance and huge deficits, these purchasers will end up monetizing government debt whether the Fed admits it or not. That’s his words. So when you put all this together, Powell saying reserves must grow, Williams talking about gradual purchases, Logan saying they may need to begin buying assets. Evercore modeling 20 to 50 billion a month in 2026 and the early injections already happening, you can start to see this pattern that’s forming, right? They’re not rescuing the economy, they’re rescuing the system.

And historically, when the Fed shifts from shrinking the balance sheet to growing it again, liquidity improves, risk assets respond. Now we saw this in 2019, we saw it in 2020, and now we’re lining up for the next phase. And that’s what’s happening right now. Okay. And to understand where this actually goes, we want to go back in time. So let’ back to the last time the Fed tried this experiment. So we’re going to go back to 2019. Now back then QT had had been running, right? They’ve been tightening for a couple years. The Feds was shrinking the balance sheet right, since 2017.

And by August of 2019 they officially said we’re done. Right, okay, we’re done. QT is over. We’re going to go back to now reinvesting. All right, so that’s your first marker. QT ends in late summer 2019. But within a few weeks, the plumbing broke. On September 16, 2019, the repo market blew out. Overnight. Repo rates which have been trading near the Fed funds rate, they spiked intraday as high as 10%. And that’s not a small technical glitch. That’s the system breaking, right. That’s the system saying that there aren’t enough reserves and I’m gonna pay almost anything to get cash right now.

Now, the New York Fed had to step in immediately with overnight term repo operations. So starting September 17, just to get rates back under control. And so what we saw was QT ended, right? And then right away the funding system locked up. And then comes the part a lot of people forget. On October 1, 2019, the Fed announced they are gonna start buying 60 billion per month of treasury bills, about the same number that’s being projected right now. Now, they were very careful with the language. Powell said this was not qe, right. This was purely technical.

Same thing he’s saying now, right? This was just to maintain apple reserves. And it of course didn’t represent a change in the stance of monetary policy. But if you look at the numbers between October 2019 and early 2020, the Fed’s balance sheet grew by more than 270 billion. Now, they can call it whatever they want, but when they’re buying bills and they expand the balance sheet again, that’s what’s happening now. What happened to markets once that liquidity came back in? That’s the important part that we want to know, right? We want to know what happens in 2026, what it has in store.

So if we go back and let’s look at the S&P 500, so if you anchor it from say early September 2019 into the pre Covid peak in February of 19, in 2020, the S&P went up about 16 and a half percent. Now, if you take it from the early October low to that February high, it’s closer to about 18 and a half percent. Once the Fed flipped from draining liquidity to adding liquidity, stocks went much higher. Now if we look at the Nasdaq, which is, you know, way more sensitive to liquidity, from early September 2019 to again February 19, 2020, the NASDAQ went up 24.7%, about 25%.

So if you go from early October low, right, it’s about 27.5%. So QT ended, the Fed starts buying T bills, the balance sheet quietly expands, and in that five to six month window, you get roughly 17 to 19% on the S&P 500, roughly 25 to 28% on the NASDAQ. But what about the debasement hedges? Right now, gold had already started moving before that. For the full year of 2019, it was up rough. It was about 1290 an ounce and it went up to about 1500 dollars an ounce by December 31st. So about 17 to 18% gain for that year going into early 2020.

Now it continued grinding higher towards about the 1600 area. So gold responded to the shift in policy just the same, but in a little bit slower, more old school way. But bitcoin on the other hand. Bitcoin measured from the 2019 low around 3,200 up to that 10,500 peak in February 2020. So that’s more than a 200% run. And then of course, after the COVID crash, bitcoin went on to do roughly 300% just in 2020 alone. So when you put it all together, here’s what the 2019 playbook really looks like. August 2019 QT ends August September 2019 the repo markets blow out.

Rates spike. QT ends October 2019. Fed announces 60 billion a month in purchases and it’s not QE. But from that period into February of 2020, the pre Covid crash S&P up about 19%. Nasdaq 28% gold 18% and Bitcoin was up nearly 200%. Different assets, different magnitudes, but all from the same driver, right? Once the Fed stopped shrinking the balance sheet and went back to growing it, liquidity improved risk assets, they responded. And of course then Covid came out, right? It came out of nowhere. Apparently it interrupted that entire move, which is why I stopped all my comparisons at February 19th of 2020.

But what we care about is the part that’s comparable, right? QTNs, the plumbing breaks, the Fed quietly restarts balance sheet expansion markets. Treat that as a green light. And by the way, real quick, if you want to be ready for this next cycle, what’s going to happen in 2026? Not just watch it. I’m hosting a live virtual Wealth OS accelerator live virtual event January 7th through 9th. We’re going to build your full wealth engine together, workshop style. So you’re ready for what’s coming. Now there’s going to be a link down below. We’ll put a QR code here on the screen.

All right, so now that we understand the same thing, right, we’re we the same thing we saw in 2019. It’s happening again right now. Now if we zoom out and we use 2020 to 2021 as the real analog, what are the next two years looks like, right? What happens when the Fed fully turns the hose back on? Because 2019 was, was when the regime change happened, right? From tightening to easing. But 2020 and 2021 were the two year results of that regime change. So now, just like I had to caveat before that, we have to keep in mind, right, this all gets somewhat distorted because of that Covid crash, but the Fed’s balance sheet went from roughly 4 trillion at the start of 2020 to about 7 trillion by June and then almost 9 trillion by the end of 2021.

Now look at what happened to asset prices in that environment. The S&P 500 was up 18% in 2020, another 28% in 2021. Back to back years of roughly 18 to 28%. And this is while the real economy was all over the place, right? Small businesses were getting shut down. NASDAQ did Even more in 2020, the NASDAQ was up around 48%. In 2021, it added another 27% on top of that. So in the two years where the Fed balance sheet basically doubled, big tech and growth stocks gave you something like 90% total returns. Gold pushed another 25% in 2020.

So as the Fed was pushing trillions into the system, the classic hard money asset, it broke out to new all time highs. And then of course, you have Bitcoin. That’s the cleanest signal of all. From March 2020, Covid low around 4 to 5,000. Bitcoin ran about $29,000 by the end of 2020. So that’s a 300% return in that year. Then in 2021, it ran again to about $69,000 at the peak. So from the COVID panic low to the November 2021 high, you’re talking about a move on the order of 1200%, right. In less than two years.

So these are all different assets, but the same environment. Right? When the Fed explodes the balance sheet, liquidity floods the system and anything remotely sensitive to liquidity and debasement rips higher. Here’s why I’m walking you through those numbers. Right? We’re setting up for the same version, right? The same playbook, right. Going into 2026 and probably 2027, but on top of a much bigger starting point. Now, back then we were ramping from roughly 4 trillion to 9 trillion. Today. QT has already taken us down to about 6.6 trillion. But the deficits, they’re bigger. Right now. They’re about 1.8 trillion per year.

On top of that, Powell’s term ends May 2026. And it looks like the next Fed chair is likely to be more dovish than he was. More friendly to low rates, more friendly to easy money, especially under the Trump administration. That’s already been pretty public about pressuring the Fed to cut rates, right? Trump wants rates around 1%. Now, of course, we aren’t going to get the exact same move as 2020, 2021, right? We’re not. It’s not gonna be tick for tick. But the point is, is that when the Fed moves from shrinking the balance sheet to expanding it again, right, the shift in liquidity has repeatedly lined up with powerful moves in risk assets and stocks and tech and gold, and especially Bitcoin.

So when I talk about a liquidity wave in 2026, I’m looking at what actually happened the last time, right? The last time they opened the floodgates. And then looking at where we are today, right, bigger balance sheet, bigger, bigger deficits, still elevated inflation. And the Fed’s already told you that reserves will have to grow again, right? That’s the environment that we’re heading into right now. All right, so let’s bring all this back and let’s bring it down to earth just for a minute. Because this is where some people could get hurt, right? It’s also where people can start to front run the entire next cycle if they simply stop doing what the average person does.

Now, the first thing I want you to understand is this. Savers lose, asset owners win. But this is the part where most people blow the entire opportunity, right? The media right now is going to try to drown you out in bad news, right? They already are. Bad jobs reports, bad manufacturing numbers, bad consumer sentiment, bad tariff headlines, whatever. Every talking head on TV, on YouTube, whatever on social media is going to tell you the economy’s cracking. And of course, a lot of it’s true. But the problem isn’t the data. The problem is what fear does to the average investor, right? It freezes them, it keeps them sitting in cash.

It makes them wait for certainty. That’s never going to come, right? This is exactly what happened to people in 2020. People sat on the sidelines because the headlines were, you know, terrifying. And by the time they felt safe again, the market already ripped 50 to 70% higher, right? Fear is the tax you pay when you don’t understand the system. And here’s what us being in a debt based monetary system means, right? Today, the Fed is trapped, right? They can talk tough all they want, but they can’t shrink the balance sheet. They can’t pay the debt off, right? They can’t shrink it any further.

The plumbing broke. Now again, we’re already seeing the pressure in the repo markets. We’re seeing it in bill yields we’re seeing it in reserve balances. The Fed’s been signaling for months that they need to expand reserves. Again, that’s not a forecast, right? That’s what they’re telling you. And while the Fed is boxed in, the government’s spending like, like none of this matters, right? Running $2 trillion annual deficits, right? And that’s in a full employment economy. So when you add it up, you get a picture that’s actually pretty simple. As Lyn Alden says, nothing stops the train.

The long term direction is set. More debt, more deficits, more printing, more liquidity injections, more support under asset prices, even if it comes with huge volatility. And that’s the part that people really start to mess up. They see short term volatility and it scares them out of that. You know, this whipsaw that could happen out of positions that would have doubled or tripled if they had just held. It’s the oldest story in the book, right? So here’s how I’m thinking about it. Be prepared for volatility. So what does that mean? Don’t use margin, right? When volatility is this high, margin could completely wipe you off faster than anything.

Own scarce assets, right? As J.P. morgan called it, the debasement trade. So commodities, gold and Bitcoin, of course. But every thesis needs one more thing, right? We have to understand what is the threat that could be break all of this. And so that leads me to what I’m calling the gray swan warning. It’s not a black swan. A black swan is completely unexpected. This is a gray swan. And so the one thing that I’m watching, the only thing that I think could change this entire thesis, and this isn’t economic, it’s not about inflation, it’s not about rates, it’s not even about the Fed.

It’s, it’s again, it’s a gray swan. Because you can start to see it forming, right? You don’t know if it’s going to actually hit. But for 2026, the big gray swan that I’m watching, again, it’s not financial, it’s domestic political instability, right? We’re seeing levels of institutional conflict that are way higher than normal, right? Agencies are clashing, courts are stepping in, states are fighting the federal government. We have legal warfare happening everywhere. And when you get this much tension across the system, the odds of something breaking go up. Now, to be clear, this is not my base case, right? I’m not expecting it, but I am watching it.

I’m watching it very closely because every macro thesis, you have to include what the risk could be, what could invalidate, validate my thesis. And if this tension escalates, it could reshape the path, right? It could reshape the pacing. And if this tension escalates, it could reshape the path, or at least the pacing of what I think is still the biggest opportunity of this cycle. Now, if you want me to do a full separate video breaking all this down, the risk from a purely macro and historical perspective, let me know in the comments down below and I’ll put a whole video together on that if you want.

But that’s the setup, right? The Fed just ended qt. Liquidity is coming. It’s coming back into the system. The historical pattern for what happens next is consistent. Now, the only mistake that people make in times like this is doing nothing because they’re scared by the headlines. And if you want help building a system so you’re not reacting emotionally, if you want a clear plan for how to reclaim your time, optimize your income, and multiply your wealth through this next cycle, then come join me live, January 7th through 9th for the Wealth OS Accelerator Live virtual event.

It’s three days. Three days live. We’re going to build your entire wealth engine together so you’re not guessing your way through 2026 because revenue is what you earn, but wealth is engineered. So stop guessing, start building, and come to the live virtual event. It’s not a seminar, it’s a workshop. Check out the link down below or put a QR code on the screen right here and I’ll see you inside. And remember, when you understand the cycle, you stop reacting to the news and you start anticipating the future.
[tr:tra].

See more of Mark Moss on their Public Channel and the MPN Mark Moss channel.