Two major factors affect capital liquidity, thereby impacting the market

The main reason for the poor market performance is insufficient liquidity, and there are two reasons for the liquidity shortage

The first is due to the U.S. government shutdown. To maintain daily expenses, the balance in their TGA account will rapidly expand, which will drain most of the liquidity from the market. In the past three months, the TGA balance has surged from $300 billion to $1 trillion. During the shutdown, the demand for funds becomes tighter, leading to even less market liquidity.

The second is the Federal Reserve. The Fed only began tapering in December, so they are still tightening liquidity this month. Additionally, Powell and some Fed officials have taken a hawkish stance, causing U.S. bond yields to rise again, which also affects market sentiment.

Well, actually, these two factors aren’t too severe because they are both controllable. The Fed will stop tapering in December.

The rest depends on when the U.S. government ends the shutdown.

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