Wall Street: Liquidity, Not Economic Outlook, Explains 2023 Stock Gains
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Wall Street strategists believe liquidity from central bank balance sheets, not economic outlooks, explains stock market gains in 2023.
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Though the Fed's balance sheet is shrinking, bank reserves have expanded by $500B, increasing capital available for markets.
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Rising reserves are due to the Fed's reverse repo facility drain and Treasury General Account declines.
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Goldman Sachs and other banks also point to the liquidity boost from central banks supporting markets.
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If the liquidity impulse fades in 2023, stocks could struggle, but the current setup resembles past QE programs.