Experts reveal what's behind the 2023 stock market rally and why rising liquidity is driving stock prices

Experts reveal what's behind the 2023 stock market rally and why rising liquidity is driving stock prices

According to a report by www.finanzen.net,
Stock markets posted a strong performance in 2023, driven by investors' hopes of falling interest rates and a soft landing for the US economy. However, some Wall Street experts see another factor as crucial to the rally. They believe that increasing liquidity in the financial system has triggered a QE-like rally.

According to Matt King, equity strategist and founder of Satori Insights, liquidity in the market has increased, which is responsible for the recent bull market. Reserves in the banking system have increased by $500 billion, resulting in an increase in the amount of capital available for use in the markets and economy. This increased liquidity has historically led to rising stock prices as investors invest excess cash in securities. This explains the recent rally and reaching new all-time highs in the US indices Dow Jones Industrial and NASDAQ Composite.

Experts at US investment bank Goldman Sachs believe that the expansion of US liquidity will support the performance of risk assets such as stocks until January 2024. High liquidity in the market has also caused assets like Bitcoin and Big Tech stocks to rise sharply, with markets ignoring some early signs of a slowdown. This suggests that the stock market rally could continue into the new year.

The increasing liquidity is therefore expected to continue to have a strong impact on the stock market and could further drive up the prices of securities. The hope of a further cut in key interest rates and increased liquidity support should help the recent rally in the stock market to continue in the future.