Morgan Stanley Warns Stock Market Faces Liquidity Tightening Risk as Fed Asset Purchases Drop 75%

According to Bloomberg, Morgan Stanley strategists led by Michael Wilson flagged liquidity tightening as a greater near-term threat to stocks than interest rate risks. The team noted that the Federal Reserve's asset purchases through reserve management have declined approximately 75% from their peak, reducing the liquidity support provided by the central bank's balance sheet. The strategists stated that the tightening liquidity environment may continue to constrain stock market gains in July as markets reassess the Fed's recent policy stance.
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