Fed to Keep Bloated Balance Sheet as a Tool, JPM's Azzarello Says

The video discusses the Federal Reserve's strategy of maintaining a large balance sheet to manage future economic downturns, despite moderate rate hikes. It highlights the market's response to these policies, noting a lack of high-yield issuance and the impact on credit markets. The European Central Bank's decision to shrink its balance sheet is seen as a significant shift, affecting global liquidity. Despite strong economic growth indicators, there is a disconnect between positive data and negative market sentiment, with concerns about a potential recession despite no clear signs in the economy.

Discuss the relationship between liquidity support and risk tolerance in financial markets.

What factors contribute to the disconnect between economic sentiment and actual data?