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NDR : Risk Assets Love Liquidity

"Liquidity is the lifeblood of the financial markets... Risk assets love liquidity. Continued draining of liquidity presents a risk for equities and credit," Ned Davis Research chief global macro strategist Joseph Kalish said.

The Fed has been reducing its balance sheet by about $80 billion per month, and stocks tend to perform well when the exact opposite happens, according to NDR.

"Our analysis shows that when the 4-week change of reserves has increased by more than $62 billion, stock returns have exploded at a 31% annual rate since March 2009 when the Fed began ramping up QE and shifted to an ample reserves regime," Kalish explained.

To read the rest of the interview and article by Matthew Fox of Market Insider, published August 10, 2023, follow this link:

To explore more of Ned Davis Research's collection of charts and publications, request a trial by filling out the form to the right.

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