The Federal Reserve's move to release $5 trillion in liquidity looks very attractive, but the logic behind it is far from simple. The problem is that the current US inflation rate is still stuck at a high 3%, far from the 2% target. At such a time, releasing another $5 trillion in liquidity is undoubtedly adding fuel to the fire, increasing the pressure for inflation to rebound.

Therefore, the Fed has adopted a "quiet liquidity injection" strategy — aiming to support the economy through liquidity while also preventing market expectations of "out-of-control inflation." Otherwise, asset prices could experience sharp fluctuations. It's like dancing on a tightrope; even a slight imbalance could lead to a fall.

For us investors, two major risks must be clearly understood:

First is the "all-clear" callback trap. The pattern in financial markets is this: buy on expectations, sell on reality. If the market preemptively absorbs the $5 trillion liquidity, by the time the policy actually takes effect in mid-January, a reversal might occur. Those chasing the high often react the slowest and end up trapped.

Second is the risk of inflation exceeding expectations. Once liquidity releases ignite inflation, the Fed may be forced to tighten policy earlier than planned. In this scenario, growth stocks and commodities — assets sensitive to inflation — will suffer, often experiencing steep declines.

To counter these risks, the principle is clear: moderate positioning and avoid blindly following the trend. Before the policy officially takes effect, do not overbid on risky assets; keep some cash ready for potential pullbacks. Also, closely monitor US inflation data; if inflation continues to rise, adjust your allocations immediately, especially reducing holdings in growth stocks and commodities.