LOCKED The Fed’s Balance Sheet: The Definition of Insanity

Summary

We believe that the balance sheet is just too powerful a weapon to be withdrawn
This is because markets believe QE is reflationary, i.e., it drives higher equities and yields
Hence, as in the last two tightening cycles, any tightening is ultimately doomed to fail
Currently, we are less concerned about a dollar Napalm run but worry about equity markets

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