The Liquidity Flip: How Today’s Fed Decision Could Reshape 2026 WinnersThe exact framework I use to read the Fed, map the liquidity shift, and decide what to buy, hold, and avoid today and beyond.
By the time Powell steps to the microphone this afternoon, most of Wall Street will already be wrong. They will be fixated on the headline.
In other words, they will obsess over the theater. What actually matters for your money is something far more basic and far more powerful: Is the Federal Reserve draining liquidity from the system, or quietly adding it back in. We are very close to a moment that only comes around a few times per cycle. A point where the direction of liquidity flips. And if you understand how that flip works, you will know why some corners of the market are about to become very dangerous, while others are setting up for the kind of multi-year runs that can rewrite your net worth. Most investors will miss it completely. You do not have to be one of them. Everyone Is Arguing About The Wrong ThingIf you flip on financial TV today, you will hear the same tired script. One camp says the Fed is “behind the curve” and needs to cut aggressively. Both sides want to drag you into a political argument. Here is the problem. The market already made its judgment long before Powell opens his mouth.
In other words, by the time we get the press conference, most of the easy reaction trade in the front end of the curve is already gone. What is not priced in yet is how this all plays out over the next 12 to 24 months now that the Fed has effectively stopped draining the pool. Because while everyone was yelling online about “higher for longer,” something important already changed in the plumbing. Quantitative tightening is ending. QT Just Ended. That Changes The Game.For the last couple of years, the Fed has been shrinking its balance sheet. That is the part of policy almost no one talks about at cocktail parties, yet it is the one that often matters most to markets. Here is the simple version:
Think of QE as opening a fire hose into financial markets. We have been in that draining phase. The green line in the chart below is the Fed’s balance sheet. It explodes higher in 2020 when QE hits, tops out in mid-2022, and then quietly rolls over. From that peak forward, the Fed has been shrinking its balance sheet almost every month, even as the S&P candles keep marching to new highs.
Now we are at the pivot point. The Fed has effectively stopped shrinking the balance sheet and started talking about “reserve management” again. They do not want to call it QE. Instead, they will dress it up in technical language. You will hear phrases like:
Translated: they are done yanking liquidity out of the system and are laying the groundwork to keep it abundant. It does not sound dramatic, which is exactly why most investors will ignore it. But if you look at how markets behaved the last time QT ended, you will understand why this moment matters. What A Liquidity Flip Usually Does To MarketsWhen the Fed shifts from active draining to neutral or gently adding, the effect is rarely instantaneous. You do not wake up tomorrow to a straight line higher. Instead, liquidity moves through the system in stages. First, the stress points ease.
Then the “liquidity sponges” start to respond. These are the parts of the market that soak up every extra unit of easy money.
They do not all move together, and they do not all survive the full cycle. Some become the next big winners. Finally, once enough investors realize the regime has changed, capital starts to rotate. Out of assets that only made sense in a world of artificial scarcity. That is the phase that produces the biggest long term winners. It is also the phase that almost no one prepares for ahead of time. The Collision Course In DecemberWhy does this matter today of all days Because we are heading into one of the most crowded months of cross-currents I have seen in years. On one side, you have the Fed.
On the other side, you have a packed calendar of real world market events. In crypto, December is loaded with:
At the same time, in traditional markets, you have:
That is what happens when you slam a monetary turning point into a month full of catalysts. Liquidity that was scarce becomes less scarce. Supply that was manageable becomes less manageable. Traders who have been on one side of the boat all year suddenly realize the water level is changing beneath them. And because most of them are watching the wrong dial, they are likely to be late. Where The Real Opportunity LivesIf you are thinking like a serious investor, the question you should be asking this morning is not:
The question is:
I believe the opportunity breaks into three buckets:
Most of the content you will see today will treat them all the same. Everything will be framed as “risk on” or “risk off.” That is how you end up buying the wrong things at exactly the wrong time. My job is to help you tell the difference. Which brings us to the part of this report you will not hear about on TV. The specific ways I am positioning as this liquidity flip takes hold. Before we get to the details, including the exact names on my watchlist and the levels I am using, I want to be very clear about something. This is where the real value of my work lives. If you are a premium member jump down to the “How I Am Positioning For The Liquidity Flip” section.If you are not, I highly suggest you become one because this next part is… The Most Valuable Part Of This ReportThe premium side of this report shows you how I am turning that into actual trades. When you upgrade, you immediately unlock: ✅ Real Trade Setups That Work ✅ Macro Intelligence You Can Actually Use ✅ Priority Access To My Best Ideas If you want to see which assets I believe are best positioned to benefit from this liquidity flip, along with my buy zones, targets, and risk controls, now is the time to upgrade to premium and read the rest of this report... Continue reading this post for free in the Substack app
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Rabu, 10 Desember 2025
The Liquidity Flip: How Today’s Fed Decision Could Reshape 2026 Winners
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