Ark Invest: Liquidity is Recovering and May Lay the Foundation for a Year-End Market Rally

Jinse Finance reported that on November 27, Ark Invest stated in an article that U.S. market liquidity finally began to recover after hitting a multi-year low of $5.56 trillion on October 30. A six-week government shutdown resulted in a liquidity loss of $621 billion, but with the government reopening, $70 billion has already flowed back into the market. It is expected that in the next 5-6 weeks, as the Treasury General Account normalizes, another $300 billion will return. The improvement in the liquidity environment coincides with the Federal Reserve's shift to a dovish stance. New York Fed President John Williams, California Governor Waller, and San Francisco Fed President Daly have all expressed support for interest rate cuts, raising the market-implied probability of a near-term rate cut to about 90%. Ark Invest believes that as liquidity recovers, quantitative tightening (QT) will end on December 1, and monetary policy will turn supportive. We believe that the market is forming conditions that could potentially reverse the recent downward trend.