-[QE]=QT12 Feb 2022 15:16
In theory, if QE pushed down bond yields and pushed up inflation, then QT should do the opposite. Analysts reckon the process will begin sometime in the summer.
Why are investors worried?
Traders and investors have been bruised by past experience.
The Fed has only tried QT once before, in 2018, and it didn't go so well for markets. Stocks fell sharply in 2018, with the S&P 500 dropping more than 6%. After about 10 months, the central bank reversed the policy.
Yet Hugh Gimber, global strategist at JPMorgan Asset Management, said 2018 is a bad guide because there was so much else going on, not least the US-China trade war.
Nonetheless, this is "definitely an uncertain time for investors," he told Insider.
QT on this scale has never been attempted before. From May 2022 to May 2023, the four biggest central banks – the US, eurozone, UK and Japan – are expected to reduce their balance sheets by $2 trillion, according to Morgan Stanley economists. That's four times more than in 2018.
https://markets.businessinsider.com/news/bonds/quantitative-tightening-explained-qt-federal-reserve-bonds-stocks-interest-rates-2022-2