Quantitative Tightening

Quantitative tightening (QT) is the Fed's act of reducing its balance sheet or taking money out of the economy. We discuss why now, decision makers, and impact.

The goal of QT is to help reduce inflation. At this time, inflation is at a multi-decade high, with headline inflation just over 8%. This elevated level has an impact on spending and spending patterns. The Fed is attempting to apply QT without slowing economic activity too much and triggering an economic recession.

Let's do some back-of-napkin math: If the Fed removes $50 billion from a $9 trillion base amount, that equates to about half of a percent of that total base amount over the next few months. The key here is the direction of their actions, not the magnitude.

From a portfolio and investing perspective, there is uncertainty in the markets. Though, there's always uncertainty, especially in the short term. We continue to advocate for remaining diversified with investments, sticking to a long-term plan, and maintaining levers ready to pull for a variety of conditions and outcomes.

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