Morgan Stanley’s Mike Wilson, arguably Wall Street’s most pessimistic voice
One mistake he will concede was on the impact of the bailout of depositors, and whether it was a form of a monetary stimulus. “At the time, we said it was not QE,” says Wilson.
“While that is true from a technical aspect – i.e. the Fed/FDIC are not buying bonds, but rather lending money to banks temporarily – it did add liquidity to the system and allowed banks to continue operating and extending credit.”
That liquidity is set to evaporate, he says, with the issuance of Treasury bills after the debt-ceiling impasse was resolved. Wilson says up to $500 billion will be funded from bank reserves.
“Historically speaking, the equity market does not trade well when we see such a drawdown in bank reserves. Combined with the fiscal drag, this should be a challenging cocktail for equity investors,” he says.
Steve Goldstein MarketWatch 20 June 2023
Treasury needs to raise more than $1 trillion in auctions over the next few months.
https://englundmacro.blogspot.com/2023/06/mr-powell-and-his-colleagues-have-spent.html
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