The Fed said QT, the market got secret QE, and $2.5 trillion moved behind the curtain. US M2 money supply speaks clearly to that.

by

Tom McClellan
@McClellanOsc
I wish to politely disagree with this assertion. Yes, QT was happening, shrinking the Fed’s balance sheet, and yes, the stock market advanced. But the Fed was engaged in QE all the while, just under a different format.

While QE4 was still underway, the Fed began compiling over $1.5 trillion of Reverse Repurchase (RRP) agreements with member banks, effectively loaning the banks Treasuries in exchange for tying up the banks’ other reserves which shrank overall liquidity. The Fed continued the rise in RRPs after QE4 ended, which was part of why 2022 was such a bad year for the stock market. In other words they still had a foot on the brakes (RRPs), but they also took a foot off the gas (ending QE).

RRPs got as high as $2.5 trillion at the end of 2022, and have been coming down since then. The unwinding of RRPs frees up the member banks’ reserves to go back to contributing to overall system liquidity, which has helped to boost the stock market (except during the March-April 2025 tariff crash).

RRPs are now down to effectively zero, so that well of secret QE is now run dry. But the Fed has started doing regular Overnight Repos, which have the effect of adding temporary QE into the system.

The mid-November selloff in the stock market after the government reopening triggered a brief wave of repo activity, reaching as high as $26B on Dec. 1, which helped to rebound the stock market out of the Nov. 20 low and brought all of the discussions we were having here on X about a Zweig Breadth Thrust thanks to all of that liquidity going to work. But the Fed unwound those quickly, and Overnight Repos are back down to zero, which is why the thrust stalled out.

In summary, QE as strictly defined may not have been happening, but Fed stimulus can be hidden in many forms, and is still a big driver of what the market does.

They never really took their hands off the money machine.