Liquidity Remains A Concern in Wild Markets

By Gunjan Banerji

The stock market has sharply rebounded to start the week, but analysts are warning that the market remains prone to sudden shocks.

Liquidity--which measures how easy it is to buy or sell different assets--in S&P 500 futures has deteriorated to historically low levels over the past week, according to Bank of America analysts.

"Our short-term forecasting model for detecting U.S. equity market fragility has reached its highest level since [March 2020] as S&P 500 futures liquidity has declined to near historic lows amid the recent speculative frenzy," the analysts wrote. "Failing trading liquidity has been among the best predictors of sudden market shocks."

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(END) Dow Jones Newswires

February 02, 2021 10:20 ET (15:20 GMT)

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