Ark Invest: Liquidity is recovering, potentially setting the stage for a year-end market rally
2025-11-27 05:45:44
On November 27, Ark Invest wrote that liquidity in the US market has finally begun to recover after hitting a multi-year low of $5.56 trillion on October 30. The six-week government shutdown caused $621 billion of liquidity to be lost, but with the government reopening, $70 billion has returned to the market, and another $300 billion is expected to return in the next 5-6 weeks as the Treasury's general account normalizes. The improved 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 Daley have all expressed support for interest rate cuts, raising the implied probability of a near-term interest rate cut to about 90%. Ark Invest believes that as liquidity returns, quantitative tightening (QT) ends on December 1, and monetary policy shifts to supportive policies, we believe conditions are forming in the market that could reverse the recent downtrend.
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