By now everyone knows that for the past year has seen the Fed unleash an unprecedented crusade against not only runaway inflation - having been responsible for the surge in prices in the first place thanks to trillions in post-covid "MMT" helicopter money - and employment - hoping to contained the soaring inflation by means of a broad economic recession - but has also targeted prices of equities and bonds, i.e., risk assets, which after a decade of merciless and relentless asset bubble blowing have been suddenly forsaken by the money printing institution of the US which has been doing everything in its power to hammer every rally and crush animal spirits (if only for the time being, a time when weekly angry phone calls from the senile occupant in the White House demanding the Fed make everyone equally poor impinge on the Fed's true first commandment which is to make a handful of people very rich while monetizing the US debt in the meantime).
In its determined pursuit of lower asset prices, the Fed has been engaged in the fastest rate hiking campaign since Volcker broke the back of double digit inflation 40 years ago. But as rate hikes are about to downshift again to 25bps, before hitting pause (and going into reverse in the second half of '23 according to the market if not the Fed) the Fed is left with another, more powerful tool to crush risk prices: QT, the same Quantitative Tightening that Goldman's head of hedge fund sales last week said that "While All Attention Is On Rates, The Real Risk Is That Global QT Is Just Starting."
Understandably, the fact that QT may stick for a long time even as the Fed's rate hikes end (and reverse), is keeping traders on edge. Indeed, while we disagree with Goldman on most thing, we certainly are sympathetic that while rates may come and go (and rise or fall), what happens in the market is mostly a function of QE (or, as the case may be, QT).