Analysts at a major investment bank have indicated that the primary risk for stock markets currently stems from tightening liquidity, rather than the potential threat of interest rate hikes.
The team, led by Michael Wilson, pointed out that the scale of asset purchases conducted by the Federal Reserve through reserve management has decreased by approximately 75% from its peak, indicating a diminishing level of liquidity support from its balance sheet.
The strategists wrote in their report, "The liquidity environment is tightening and is likely to continue posing a headwind to the stock market's advance through July, especially as the market tests the Fed's newly demonstrated policy stance."
The team anticipates that corporate profits will remain the central driver for the ongoing bull market in equities.
Comments