Massive Liquidity Drain May Send Stock Prices Even Lower

Summary

• Markets may face liquidity challenges as Tax Day leads to a significant rise in the Treasury General Account and a decline in reserve balances.
• Historical patterns show that the S&P 500 often experiences volatility and potential drawdowns around Tax Days, influenced by the size of tax receipts.
• Tightening liquidity conditions, indicated by rising overnight rates, could signal rocky times ahead for the equity market.
• Monitoring the secured overnight funding rate can provide insights into market liquidity and potential equity market performance.