What happened?
The Fed announced it will end quantitative tightening on December 1, 2025 and shift to balance-sheet maintenance while redirecting agency income into Treasury bills. Ray Dalio says this move looks less like a technical tweak and more like the start of “stimulating into a bubble” because it comes alongside big fiscal deficits and strong private credit growth. He warns that this combo could send gold, Bitcoin and long-duration stocks much higher before an eventual sharp collapse.
Who does this affect?
Investors and traders in stocks, bonds, gold and crypto are likely to feel the impact most, especially holders of long-duration assets like tech and AI names. Savers and income-focused investors could see real returns squeezed as real rates fall and equity risk premia compress, while central banks and governments are implicated through increased gold buying and debt monetization. Borrowers and fiscal policymakers may get cheaper funding now but that raises the risk of a later painful tightening that could hurt leveraged players and institutions.
Why does this matter?
Market-wise, easier liquidity and potential rate cuts should push real rates down, compress risk premiums and inflate P/E multiples, creating a liquidity-driven “melt-up” in risk assets and inflation hedges. That can lift gold and Bitcoin sharply and drive speculative excess in tech, but it also leaves fixed-income and income investors with poor yields and elevated risk. The net effect is higher odds of big gains followed by a violent unwind, so positioning and risk management become critical for investors and institutions.