Forget Quantitative Tightening – The Fed Will Double Its Balance Sheet to Over $16 Trillion

According to Michael Howell, managing director at Crossborder Capital, ballooning debt in the coming years will force the Federal Reserve to abandon its quantitative tightening plan and return to quantitative easing. This shift is expected to provide a tailwind for stocks but be less favorable for bond investors. Howell predicts that central banks will need to provide liquidity not only during banking crises but also to bail out debt-burdened governments. The growing focus on public spending and expanding government deficits in developed economies further contributes to the necessity of large central bank balance sheets. Therefore, quantitative easing is likely to make a comeback, as the pool of global liquidity remains substantial.