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![MPelletierCIO Avatar](https://lunarcrush.com/gi/w:24/cr:twitter::220203225.png) Martin Pelletier [@MPelletierCIO](/creator/twitter/MPelletierCIO) on x 61.7K followers
Created: 2025-07-24 15:20:27 UTC

Equity markets are benefiting from a liquidity-rich environment that is blunting the Fed’s tightening efforts. However, this divergence increases the risk of a sharp adjustment if financial conditions suddenly snap tighter—whether due to policy, credit events, or a shift in sentiment. The market is walking a tightrope between resilient liquidity and underlying fragility.

✅Supportive Factors for Equities:
- Abundant Liquidity: Excess reserves and T-bill demand keep funding markets flush.
- Strong Market Sentiment: Narrow credit spreads and rising equity valuations.
- Functioning Capital Markets: Active high-yield issuance and equity financing.
- Expectations of Future Easing: Markets pricing in eventual rate cuts.

⚠️ Risks and Headwinds:
- Policy Lag and Credit Risk: Potential defaults in consumer credit and CRE.
- Disconnect Between Policy and Conditions: Fed may hold rates higher for longer.
- Valuation Stretch: S&P XXX near record highs increases correction risk.
- Geopolitical and Fiscal Uncertainty: Election risks and global tensions.


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**Related Topics**
[Sentiment](/topic/sentiment)
[events](/topic/events)
[$6753t](/topic/$6753t)

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