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The third significant indicator is a shift in monetary or fiscal policy. This encompasses actions taken by the Federal Reserve regarding interest rates and balance sheets, alongside government decisions on spending and taxation.
For instance, the Federal Reserve's transition from quantitative easing to tightening in late 2021 triggered a notable drop in markets, signaling that a tightening of liquidity often leads to decreased asset valuations. Investors can track changes in the M2 money supply as an indicator of liquidity—prolonged periods of tight monetary policy typically precede declines in market prices.