The Federal Reserve’s balance sheet grew by $394B in the past two weeks. In the context of all G4 central banks, this move alone erases half of all quantitative tightening (QT) progress since the beginning of the year. A directional change like this could indicate the end of a short quantitative tightening cycle. The dotted lines in the chart below demonstrate how this move would look without any additional balance sheet expansion from other G4 central banks.

So far, the ECB has been able to avoid a similar balance sheet expansion. Credit Suisse did not require intervention, and the applicable policy came from the Swiss National Bank, not the ECB.

The price of gold in USD is correlated to G4 balance sheets as a percent of GDP. Additional G4 central bank interventions causing a further increase in central bank balance sheets could be beneficial for gold.

The price of gold is inversely correlated to the US dollar and now suggests a near 4% drop in the USD.

As of 12.31.22, none of the securities mentioned were held in the Knowledge Leaders Strategy.