Treasury's $1 trillion debt tsunami isn't as bad for stocks as feared

Expectations that the Treasury Department plans to rapidly issue a torrent of new debt have shaken the confidence of investors, who fear it may take liquidity away from stocks.that will be sold between now and the end of the year will have less of an effect on liquidity from the Federal Reserve. They also said Fed liquidity is not as impactful on stocks as Wall Street thinks.

Analysts added that the notion that stocks are considerably reliant on the Fed's liquidity hasn't held up in recent years. The correlation between Fed liquidity and stocks has appeared strong recently, but is very inconsistent going back further, suggesting it is"spurious," the note said. Meanwhile, the relationship between equities and macro growth has been strong and long-standing. Likewise, liquidity also seems to be correlated with growth, the analysts found.

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