Liquidity is drying up and the market is becoming sharply vulnerable to fear, forced selling, and early signs of dislocation. This has already started.

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Markets, especially the major financial stocks globally, have begun to respond to dramatically altered liquidity prospects. Marketplace liquidity is mercurial, especially late in the cycle. Market blowoffs fueled by speculative leverage guarantee acute liquidity instability. On the upside, self-reinforcing speculation and leveraging propagate liquidity overabundance and the perception of endless liquidity. But speculative melt-ups set the stage for sharp reversals, de-risking, and deleveraging.

The liquidity backdrop (and perceptions of prospective liquidity) turns increasingly prone to abrupt shifts. Liquidity over-abundance can quickly transition to waning liquidity. And once market perceptions begin to adjust to a deteriorating liquidity backdrop, the marketplace turns acutely vulnerable to the forces of heightened risk aversion, deleveraging, illiquidity, and market dislocation. This process has begun.

https://creditbubblebulletin.blogspot.com/2025/11/weekly-commentary-volatile-and-fragile.html

Flood of AI Bonds Adds to Pressure on Markets

https://www.wsj.com/finance/investing/flood-of-ai-bonds-adds-to-pressure-on-markets-88f17995