Short interest is at a 15-year low. Liquidity’s lower high suggests tightening conditions—markets might struggle if volatility spikes.

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It’s like walking on thin ice—the market may look stable, but without enough liquidity, a little disruption could cause things to crack. It’s not a great spot to be in.

  • Short Interest: As of January 31, 2025, short interest in the market has reached its lowest point in 15 years.
  • Liquidity Conditions: The National Financial Conditions Index (NFCI) decreased to –0.65 in the week ending January 24, 2025, indicating looser financial conditions. However, the Adjusted NFCI (ANFCI) increased to –0.67, suggesting tighter-than-average financial conditions.
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The top 10% largest US stocks now reflect a record 75% of the US equity market. This percentage has surpassed the previous record set before the Great Depression in the 1930s. By comparison, at the 2000 Dot-Com Bubble peak, this percentage was at 73%. The market has never been so concentrated.
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https://www.capitaladvisors.com/research/quantitative-tightening-qt-is-coming-to-an-end-what-does-it-mean-to-cash-investors/

https://fxopen.com/blog/en/what-is-quantitative-tightening-and-how-does-it-work-in-financial-markets/

https://markets.businessinsider.com/news/stocks/stock-market-outlook-investors-most-bullish-years-short-interest-2020-8-1029525803


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