U.S. Federal Reserve Chair Jerome Powell has announced

that the Fed will soon end its balance sheet reduction program, known as quantitative tightening, or QT. But this policy shift isn’t the bullish stock-market driver most investors believe it is.

Of course, the Fed’s decision is meaningful; the central bank has been draining a large amount of liquidity from the financial system. Since some of that liquidity otherwise would have found its way into equities, QT presumably has been a significant headwind for the stock market: Since June 2022 the Fed has shrunk its balance sheet by $2.2 trillion. It seems plausible that ending it should provide a big boost for the stock market.