People are concerned about QT and its potential effect on risk assets.
I can imagine a number of factors that would make stocks go down at QT commences:
-bonds decline as supply hits the market, causing the discount rate for stock multiples to rise
-people rotate capital down the risk curve as yield becomes more attractive
-MBS selling pops the housing bubble leading to worse economic performance in the broader eco
-automatic selling from 60-40 portfolios as bonds lose value and people are forced to rebalance
-Draining liquidity from the system breaks something again and panic
my question is, during the last cycle of qt (2018-2019), stocks actually increased over the period and yields increased only slightly.
why was last qt not negative for spx and could it be the same thing time around?
do you agree with the ideas on how QT affects SPX?
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