On January 5, 2022, the Federal Reserve released the supplementary minutes of the December FOMC meeting, different from the December statements. This release of meeting minutes immediately caused a stir, with technology stocks plummeting. Even the stock prices of tech giants, which had been very stable, could not hold up. $Microsoft (MSFT.US)$Google, $Tesla (TSLA.US)$、 $NVIDIA (NVDA.US)$、 $Amazon (AMZN.US)$As stock prices collectively weakened, $Alphabet-C (GOOG.US)$Stock prices have fallen below the 120-day moving average for the first time in over a year. The whole market is on edge, with alarming signs everywhere. What exactly happened? Following the December meeting, the Nasdaq soared directly, but the meeting minutes from yesterday brought a chilling downward trend. What change in attitude has the Federal Reserve taken after three weeks? The analysis is as follows:
A significant amount of ink in the meeting minutes is devoted to discussing the normalization of monetary policy. Apart from tapering and raising interest rates, it is highly likely that balance sheet reduction may also accelerate, which exceeds market expectations.
Of particular note, participants noted that compared to the last monetary normalization event (beginning balance sheet reduction in 2017), the current economic outlook is much stronger with higher inflation rates and tighter labor markets.
Currently, whether in terms of U.S. dollars or relative to nominal Gross Domestic Product (GDP), the Federal Reserve's balance sheet is...