Expect tighter balance sheet policy from Fed, says Ironsides Macroeconomics' Knapp

Fed Policy & Market Expectations - The market anticipates a hawkish Fed cut, with uncertainty about future cuts possibly extending until June [2] - A dovish cut, indicated by projections showing more rate cuts next year, would be bullish for the market [3] - Markets have adjusted to the idea that the Fed is institutionally slightly hawkish, potentially due to external pressure to protect its integrity [7] - The market is bracing for the December meeting, which is why a surprise is possible [8] Quantitative Easing (QE) & Tightening (QT) - The Fed eased primarily using its balance sheet but tightened by draining reserves from the system, causing plumbing issues [11] - Buying Treasury notes and mortgage-backed securities lowers long-term rates, influencing equity prices and risky assets, and suppresses volatility [12] Potential Risks & Opportunities - Acknowledging the balance of risks shifting could signal underlying economic fragility [4] - Ending QT is essentially QE [4]