Summary for the 20th of March 2019


The Federal Reserve is expected to announce an update for its balance sheet reduction plan today. The balance sheet reduction program is expected to come to an end this year. This will be seen as positive for the financial market. When The Federal Reserve reduces its balance sheet, it also reduces the liquidity in the financial market. Central Banks around the world have, in the past 15 years, been supplying liquidity into the financial market by building up their balance sheets.

2018 was the first year where the opposite happened, and the liquidity in the market got tighter, due to the Fed started to reduce its balance sheet, and announced that the reduction would be on autopilot (even though central banks in the Eurozone and Japan were still supplying liquidity into the market). The sighs of tightening in liquidity had led to high volatility in the financial market in 2018.

In January this year, The Federal Reserve changed its message, and announced that the balance sheet reduction wouldn’t be on autopilot any longer, and that it would listen to the market signals. This had led to gains in the stock markets so far this year. The market is expecting the Federal Reserve to no longer tightening the liquidity in the financial market. A confirmation of this will lead to rising optimism.

Indices for 20th of March:

Dow: -0.1% (19th of March)
S&P 500: Unchanged (19th of March)
Nasdaq: +0.1% (19th of March)
Nikkei: +0.1%  (20th of March)
Chinese indices: -1.5% (20th of March)
STOXX Europe 600 Index: -0.90% (20th of March)

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