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JPMorgan’s global market strategy team spotlighted that liquidity issues are becoming “less benign,” raising red flags about the current bull market backdrop on Wall Street.
“With US broad liquidity or M2 money supply expected to be flattish for the remainder of the year and Euro area liquidity contracting by around $740B between now and year end, we expect a less favorable global liquidity backdrop going forward than over the past nine months,” the New York-based bank stated.
JPMorgan added: “The combination of low cash allocations, coupled with a likely contraction in global liquidity during the remainder of the year, poses a challenge to the current bull equity market consensus.”
See the below chart that JPMorgan shared in an investor note:
Looking at Thursday’s market action, the major market averages (DJI), (SP500), (COMP.IND) and the accompanying mirrored ETFs (DIA), (SPY), (IVV), (VOO), and (QQQ) all trade higher while U.S. Treasury yields (US2Y) (US10Y) have traded in a mixed fashion.
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