In October 2017 the Fed began the process of winding back the $US3.6 trillion ($5.1 trillion) of quantitative easing – bond and mortgage buying – it undertook to keep US rates ultra-low and inject liquidity (print money) into the financial system in response to the crisis.

It started the shrinking of its balance sheet in quite a modest fashion by not reinvesting $US10 billion a month of maturing bonds and mortgages. The level of reinvestment, however, increased by $US10 billion each quarter until it reached its planned ceiling of $US50 billion a month in October.

In effect, the massive injection of liquidity into the global financial system by the Fed started to be sucked back out at an accelerating rate late last year.

Taking the two biggest buyers of corporate and government bonds out of the market inevitably impacts the price and availability of credit.

It won’t help markets in 2019 that, even as the central banks are withdrawing liquidity and shrinking as a big source of demand for demand for bonds, the US Government is facing record borrowing requirements.

now that the Fed’s balance sheet shrinkage has reached terminal velocity and with no indication of where and when it might end – Powell has said the program is on "auto- pilot" and that he doesn’t see any need to change the policy of winding down its balance sheet – the actions of the Fed and ECB should be the most influential.

Now that they are withdrawing that liquidity it seems logical to assume at least some more deflation, which would suggest there is more pain in store for investors.

https://www.smh.com.au/business/markets/trump-s-gut-got-it-right-it-s-the-50-bs-that-matter-for-markets-20181231-p50oxd.html

whichever industries Chinese money was pouring in (in the past)...will be affected...by this agency that has been very active since few months ago...Biotech, hi-tech, semi conductors, defense, real estate or whatever other industries that were normally attractive to foreign investors..are being reviewed and not easily allowed to invest since few months ago....

If Fed is pulling money out of the market and foreign money is not being allowed to invest...will stock market go up in 2019? Perhaps not...


"A lot of foreign investors are going to look to put their money elsewhere than the United States because of this," said Richard L. Matheny, a partner and head of global trade at Goodwin Procter LLP in Washington. "I know that that's happening."

Better to be on the "PUTS" side of the market......and short the market rather than buy in the hope of market recovering....(Something that may not happen)...anyway, I'll be buying puts ..and also willing to change mind if things improve in future..
https://www.pionline.com/article/20181224/PRINT/181229943/cfius-to-take-closer-look-at-foreign-ownership