as the big liquidity source that is now being pulled back as the Fed reduces its more than $8 trillion balance sheet by nearly $100 billion per month.
"The two biggest buyers of treasuries - China and Fed - are done," Subramanian said. The implications are higher interest rates and scarce cash, which could put pressure on long duration assets like unprofitable growth stocks,On top of that, fiscal stimulus from the US government has ended and its unlikely there will be any more going forward because of gridlock in Congress.
"Fiscal stimulus is unlikely with gridlock plus deficit hawks' nuclear option - using the debt ceiling to force spending discipline," Subramanian explained. Finally, corporations are tightening their belts and have embarked on a wave of layoffs, especially in the tech sector. This comes after years of firing freezes due to the pandemic as companies look for places to cut costs ahead of a potential recession. , Congress, and corporations, have the effect of pushing up interest rates which makes cash more attractive to investors at the expense of riskier assets like stocks.
"Cash is scarce and 5% more valuable: cash users should cede leadership to cash sources ," Subramanian said. In other words, expect a risk-off environment in which more stable investments outperform riskier ones. Essentially, a continuation of what worked and what didn't in 2022.year-end price target of 4,000, basically flat to current levels for the benchmark index.