Yiji

1. The Switch in the Liquidity Source US equities are printing record highs day after day. The S&P 500 is at a new high in the 5,800s, the Nasdaq 100 at a new high in the 20,300s. As stressed before, index gains are made by rising

The major earnings season is largely done. Summary: * Strong demand for AI accelerators (hardware) and cloud (big-tech's aggressive investment commentary; visible in $TSM's results). * In-house AI software, by contrast, is mostly still early-investment stage ($PLTR / $NOW excepted). For big tech this season showed "rising customer

Part 2 established that reserves have been in sustained decline since Q2 2024. Part 3 sets the H2 2024 scenario, metric by metric. Summary: * SOMA: keeps falling on continued QT. * Lending facilities: possible early BTFP repayment within four months. * RRP: likely drawn to fund the Treasury's Q3 TGA

Carrying the identity built in Part 1 — ΔReserves = ΔSOMA + ΔLending facilities − ΔTreasury TGA − ΔRRP — this part traces where liquidity moved from March 2022, when the Fed began hiking, through 2024, across five regimes. 1. March–May 2022 (Equities → RRP) The Fed's 2022 hikes pushed liquidity out of equity

— "Earnings don't move the overall market; it's the Federal Reserve Board… focus on the central banks and focus on the movement of liquidity… most people in the market are looking for earnings and conventional measures. It's liquidity that moves markets." (Stanley Druckenmiller)