Does Quantitative Tightening by the Fed Actually Hurt the Stock Market?

"Liquidity is being drained" became a standard bear argument after 2022. The Fed did drain $2.4 trillion. Stocks still made new highs. Both facts are true, and the reason is in what QT is and isn't.

What people on X are asking

In January 2025 an education account asked in a quiz: "How does quantitative tightening typically affect" bond yields, gold prices and growth stocks? Before the September 2024 Fed meeting a trader asked: "Does QT (quantitative tightening) FED stance change matter?", and in November 2024 a market post asked "What Is Quantitative Tightening and How Does It Work in Financial Markets?". Here is the record.

The fact-checked answer

What QT is. The Fed's May 4, 2022 plan explains it: starting June 1, 2022, principal payments from securities the Fed holds would be reinvested only to the extent they exceeded monthly caps, initially $30 billion a month for Treasuries (rising to $60 billion after three months) and $17.5 billion for agency debt and mortgage securities (rising to $35 billion). The Fed does not sell bonds in the market; it simply lets them mature. That shrinks bank reserves and leaves more bonds for private investors to hold.

When it ended. On October 29, 2025 the FOMC "decided to conclude the reduction of its aggregate securities holdings on December 1". The first round ended similarly: in July 2019 the FOMC said it would conclude reductions in August, two months early.

UXS chart

Federal Reserve total assets (millions of dollars)

Fed total assets, weekly: latest

6,748,145

November 4, 2026

Highest in chart period

8,965,487

April 13, 2022

Lowest in chart period

3,759,946

August 28, 2019

Change over 1 year

+2.4%

vs October 29, 2025

Source: FRED, Federal Reserve Bank of St. Louis (FRED WALCL). Retrieved November 10, 2026. Chart computed and drawn by UXS from the raw series. FRED WALCL (H.4.1, Wednesday level, millions of US dollars). QT1: Oct 2017 – Aug 2019. QT2: Jun 1, 2022 – Dec 1, 2025. Download the data (CSV)

Year by year: Fed total assets, weekly

Computed by UXS from the same data as the chart. Tap a column header to sort. * = year to date (latest data November 4, 2026).

Year	Fed total assets, weekly: last value	Change vs prior year	Year high	Year low
2026*	6,748,145	+1.6%	6,759,955	6,573,602
2025	6,640,618	-3.6%	6,853,554	6,535,781
2024	6,885,963	-10.7%	7,686,710	6,885,963
2023	7,712,781	-9.8%	8,733,787	7,712,781
2022	8,551,169	-2.4%	8,965,487	8,551,169
2021	8,757,460	+18.9%	8,790,495	7,333,968
2020	7,363,351	+76.8%	7,404,039	4,145,912
2019	4,165,591	+2.2%	4,165,591	3,759,946
2018	4,075,636	-8.4%	4,446,062	4,075,636
2017	4,448,680	-0.1%	4,484,492	4,437,148
2016	4,451,451	–	4,501,695	4,446,307

What stocks did. Measured on FRED's S&P 500 closes:

S&P 500 during the two QT periods

Computed by UXS from FRED WALCL and SP500. The S&P 500 had already fallen from 4,797 (Jan 3, 2022) before QT2 started, as markets priced rate hikes. Tap a column header to sort.

Period	Fed total assets	S&P 500 start → end	Change	Worst fall inside
QT1: Oct 2, 2017 – Aug 30, 2019	$4.46tn → $3.76tn	2,529 → 2,926	+15.7%	−19.8% (Sep 20 – Dec 24, 2018)
QT2: Jun 1, 2022 – Dec 1, 2025	$8.92tn → $6.55tn	4,101 → 6,813	+66.1%	−12.8% to Oct 12, 2022 low

Why the link is weak. Three reasons. First, QT is pre-announced and slow, so markets price it long before it bites. Second, in 2022 the much bigger force was the rate hikes: the S&P 500 fell about 25% from its January high to its October low, but most of that fall happened as rates rose, and it bottomed only four months into QT. Third, the money did not disappear from the economy in a straight line: what mattered for markets was whether funding markets stayed calm and whether earnings grew.

Where QT can matter. The late-2018 sell-off came with rising rates and QT running at its full pace, and in 2019 the Fed ended runoff two months earlier than first planned. The Fed's 2022 plan said it intends to keep holdings at the level needed to run policy "efficiently and effectively in its ample reserves regime". In other words, QT matters most if reserves become scarce enough to stress funding markets.

Since QT ended. FRED shows the Fed's total assets at $6.75 trillion on November 4, 2026, slightly higher than when runoff ended. The S&P 500 closed at 7,353.73 on November 5, 2026.

QT coincided with the only year-on-year fall in US M2 since 1959; for what that meant for crypto, see does Bitcoin really follow the M2 money supply.

Decision helper

For the rate side of Fed policy, see what happens to stocks when the Fed cuts rates and how rising 10-year yields affect the stock market; for stress signals, what widening credit spreads say about stocks.

Common mistakes

• Thinking the Fed sells bonds in QT; it mostly lets them mature.
• Charting the balance sheet against stocks and seeing causation.
• Ignoring that rate hikes happened at the same time.
• Forgetting QT is announced months in advance.

FAQ

What is quantitative tightening?

Shrinking the Fed's balance sheet by not reinvesting all maturing bonds.

When did the latest QT end?

On December 1, 2025, per the FOMC's October 29, 2025 statement.

How much did the Fed's balance sheet shrink?

From $8.97 trillion in April 2022 to about $6.55 trillion in late November 2025.

Did stocks fall during QT?

Overall no: the S&P 500 rose 66% during the 2022–25 runoff.

Does QT raise interest rates?

It can add upward pressure on longer-term yields, but the policy rate matters more.

Could QT come back?

The Fed can restart or change its balance sheet plans; it announces such changes in FOMC statements.