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Quantitative Tightening Is Already Rattling Markets Worldwide

  • Global-liquidity shift explains all: State Street’s Ferridge
  • Risk assets most vulnerable as easy-money policies reverse
Display of Stock market quotes in shanghai,China
Display of Stock market quotes in shanghai,ChinaPhotographer: Jeff_Hu/iStockphoto

When it comes to reversing their crisis-era bond buying, central bankers are focused on the destination. Traders in risk assets care more about what could be a painful journey.

The contrasting views upset markets this week. Chairman Jerome Powell reiterated the notion that the Federal Reserve would remain on auto pilot when trimming its $4 trillion portfolio, and investors dumped equities in response.