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Central Banks and Money
Federal Reserve balance sheet
42neutral
Now 2.4% (YoY) | Data for Oct 2026
Hot and cold describe position, not good or bad: warm does not mean a fall is coming, and an extreme reading does not mean a quick reversal. We describe history only, with no buy or sell advice.
What it is
Fed assets: what is measured, and why it matters
What it measures
The change in the Federal Reserve’s total assets from a year earlier: they grow during quantitative easing and shrink when the balance sheet is run down.
Why it matters
Quantitative easing puts more money into markets, and shrinking the balance sheet does the opposite. It has been a major policy tool since 2008.
Year-on-year growth of the balance sheet; higher = faster expansion.
Where it stands now
Position over time
Data: Federal Reserve H.4.1 (WALCL), via FRED (Federal Reserve Bank of St. Louis). Positions: our calculation.
coldcoolneutralwarmhotHatched = earlier periods that were also neutral
Short sample: positions start only in 2013 (less than 30 years), so conclusions should be more cautious.
When it was here before
Earlier neutral periods (3), plus the current one
US stocks after it began, cumulative1 yr2 yr3 yr
Jan 2015–Apr 20154-month period, neutral throughout1 yr−5.4%2 yr+12.2%3 yr+37.6%
Feb 20201-month period, neutral throughout · 2020 Covid outbreak1 yr+18.5%2 yr+35.4%3 yr+24.5%
Aug 2022–Sep 20222-month period, neutral throughout · 2022 Inflation shock1 yr+7.2%2 yr+31.7%3 yr+54.1%
Aug 2026–now3-month period, neutral throughoutStill under way
For each period, the changes 1, 2 and 3 years after it began are cumulative and measured from its first month; “What happened next” is measured from every neutral month, so the two give different numbers. The events named beside each period are major events of that time, not necessarily related to the readings here.
What happened nextSample too small to draw conclusions (past neutral months: 7; market episodes: 3).
Has hot or cold lined up with later returns?
No clear link in the past
2013–2021: average yearly change in US stocks over the next 5 years
Hottest 20%
+11.7%a year
All months
+11.5%a year
Coldest 20%
+11.0%a year
There is no clear relationship between hot or cold and what came next. The gaps between the bars are not consistent across months (rank correlation below 0.25); this is a record of the past, not a forecast.
Large Fed bond purchases push down long-term rates, investors move the money from the bonds they sell into stocks and other assets, and stock prices get support
This issue: Fed assets at 42 (neutral), US stocks at 94 (hot) — at least one is in the neutral range (40–60), so we make no call this issue.
●○○Not visible in our dataAgreement +0.06 · in step in 6 of 8 5-year periods
In most periods the two moved the way the common explanation says, but their highs and lows do not line up over the whole history, so overall no relationship is visible.
Values
Values over time
Unit: % (YoY). Data: Federal Reserve H.4.1 (WALCL), via FRED (Federal Reserve Bank of St. Louis).
Data and sources
Where the data come from and how they are calculated
Source
Federal Reserve H.4.1 (WALCL), via FRED (Federal Reserve Bank of St. Louis)
Frequency
Monthly
Positions start
Nov 2013 (short sample)
Method
Position = the percentile of the value itself within its own history