⚠️Liquidity conditions are DETERIORATING rapidly:

The Excess Liquidity Leading Indicator has rolled over sharply and turned negative for the first time since 2021.

This metric measures real money growth relative to economic growth, and historically has led the US stock market by 3 to 6 months.

A declining reading also typically signals a flatter yield curve over the following 3 to 6 months, a trend already underway and reinforced by this week's hawkish Fed dot plot, which pushed short-term rates higher.

Meanwhile, Chair Warsh presided over a notably hawkish first FOMC meeting, with the Fed now playing catch-up to financial conditions that have seen their sharpest tightening since the post-2020 inflation shock.

This suggests liquidity conditions could deteriorate further over the next few months.

Are equity markets heading for tougher months ahead?