Bank views: JPMorgan Chase & Co. strategist Nikolaos Panigirtzoglou estimates a flood of Treasuries will compound the effect of QT on stocks and bonds, knocking almost 5% off their combined performance this year. Citigroup Inc. macro strategists offer a similar calculus, showing a median drop of 5.4% in the S& P 500 over two months could follow a liquidity drawdown of such magnitude, and a 37 basis-point jolt for high-yield credit spreads. The sales, set to begin Monday, will rumble through every asset class as they claim an already shrinking supply of money: JPMorgan estimates a broad measure of liquidity will fall $1.1 trillion from about $25 trillion at the start of 2023. &ldquo This is a very big liquidity drain,&rdquo says Panigirtzoglou. &ldquo We have rarely seen something like that. It&rsquo s only in severe crashes like the Lehman crisis where you see something like that contraction.&rdquo It&rsquo s a trend that, together with Fed tightening, will push the measure of liquidity down at an annual rate of 6%, in contrast to annualized growth for most of the last decade, JPMorgan estimates.

 

https://www.straitstimes.com/business/trillion-dollar-treasury-vacuum-coming-for-wall-street-rally