Markets rally as US Fed expands balance sheet; $31 bn added in last 2 weeks

Historically, there has been a high positive correlation between the changes in the US Federal balance sheet and the changes in the Indian equity markets

After a brief pause, the US Federal Reserve is again expanding its balance sheet, thus continuing to support asset prices. The US central bank has added nearly $31 billion to its balance sheet in the last two weeks, and this could explain the encouraging start for equity markets in 2022.

The consolidated size of the Federal Reserve balance sheet reached $8,788.3 billion on Wednesday (January 12), up from $8,765.7 billion a week ago and just a notch below the all-time high of $8,790.5 billion on December 22, 2021.

In December, the US Fed reduced its balance sheet twice -- in the first