Some good news for the Fed, plus 🧁 weekend sprinkles 🧁
The Sandbox Daily (7.11.2025)
Welcome, Sandbox friends.
Hope everyone can cool down today from the summer heat with 7-Eleven’s free Slurpee Day. If not, feel free to cool off this weekend with this edition’s Weekend Sprinkles which is absolutely super-charged, so be sure to check it out below!
Today’s Daily discusses:
Fed balance sheet amidst ongoing Quantitative Tightening (QT)
🧁 weekend sprinkles 🧁
Let’s dig in.
Blake
Markets in review
EQUITIES: Nasdaq 100 -0.21% | S&P 500 -0.33% | Dow -0.63% | Russell 2000 -1.26%
FIXED INCOME: Barclays Agg Bond -0.42% | High Yield -0.12% | 2yr UST 3.893% | 10yr UST 4.417%
COMMODITIES: Brent Crude +2.90% to $70.63/barrel. Gold +1.34% to $3,370.3/oz.
BITCOIN: +1.19% to $117,636
US DOLLAR INDEX: +0.22% to 97.869
CBOE TOTAL PUT/CALL RATIO: 0.77
VIX: +3.93% to 16.40
Quote of the day
“Sometimes a man can meet his destiny on the road he took to avoid it.”
- Louis Salinger (Clive Owen), The International
Quantitative Tightening
Since June 2022, the Federal Reserve has been engaging in Quantitative Tightening (QT) to reduce the size of their balance sheet.
Alongside the interest rate hikes that grabbed the lion’s share of attention, the Fed has utilized this 2nd monetary policy tool to shrink its footprint in markets and decrease the amount of money in the financial system – any maturing security on their balance sheet is “rolled off” without being reinvested.
Today, the Fed's $6.66T balance sheet is at its lowest level since April 2020, and down $2.3T from the peak of $8.97T in April 2022 – a 25% reduction.
Something to celebrate!
The Federal Reserve’s holdings surged by 133% in response to the COVID-19 pandemic, however the committee has made meaningful progress over the last three years in reversing the pandemic-era stimulus. Just another $2.5T to go!
Although the initial quantitative easing (QE) programs launched to stimulate the economy after the Global Financial Crisis (GFC) and COVID-19 pandemic were intended to be temporary, balance sheet management has since become a conventional tool used by the Fed to implement policy.
The caps currently in place are $5B in U.S. Treasuries and $35B in MBS per month, effectively reducing liquidity by $40B each month – although the actual amounts have been less than the caps (mainly on the MBS side).
The peak runoff was $95B/month but the Fed has tapered their pace notably over the last year.
Slowing QT could boost equity markets while simultaneously take some pressure off long-term rates. It also protects against a new crisis that would emerge from declining reserves/liquidity in the banking system.
Sources: YCharts, St. Louis Fed
🧁 Weekend sprinkles 🧁
Here are the ideas, sights, and sounds that caught my attention this week – perfect for quiet time over the weekend.
Blogs
Verdad – Making the Most of Market Volatility (Lionel Smoler Schatz)
We’re Gonna Get Those Bastards – No Complaining (Jared Dillian)
Wall Street Journal – How Index-Fund Investing Turning Into an Extreme Sport (Jason Zweig)
TKer – 5 Thoughts I Had While Chatting With Smart Finance Podcasters (Sam Ro)
Podcasts
The Compound and Friends – Reasons to Remain Overweight with Ryan Detrick and Sonu Varghese (YouTube, Spotify, Apple Podcasts)
Risk Reversal – Meet the New Price Target, Same as the Old Price Target with Brian Belski (YouTube, Spotify, Apple Podcasts)
Movies/TV Shows
Squid Games, Season 3 – Lee Jung-jae (Netflix, IMDB, YouTube)
Music
Warren G & Nate Dogg – Nobody Does it Better (Spotify, Apple Music, YouTube)
Books
Nick Maggiulli – The Wealth Ladder: Proven Strategies for Every Step of Your Financial Life (Amazon)
Fun
The Daily Show – Trump’s Tariff Formula (Instagram)
That’s all for today.
Blake
Questions about your financial goals or future?
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Welcome to The Sandbox Daily, a daily curation of relevant research at the intersection of markets, economics, and lifestyle. We are committed to delivering high-quality and timely content to help investors make sense of capital markets.
Blake Millard is the Director of Investments at Sandbox Financial Partners, a Registered Investment Advisor. All opinions expressed here are solely his opinion and do not express or reflect the opinion of Sandbox Financial Partners. This Substack channel is for informational purposes only and should not be construed as investment advice. The information and opinions provided within should not be taken as specific advice on the merits of any investment decision by the reader. Investors should conduct their own due diligence regarding the prospects of any security discussed herein based on such investors’ own review of publicly available information. Clients of Sandbox Financial Partners may maintain positions in the markets, indexes, corporations, and/or securities discussed within The Sandbox Daily. Any projections, market outlooks, or estimates stated here are forward looking statements and are inherently unreliable; they are based upon certain assumptions and should not be construed to be indicative of the actual events that will occur.
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