Investing.com -- JPMorgan quantitative strategists find "little evidence of deterioration in market liquidity" despite recent concerns surrounding DeepSeek and tariff threats involving Mexico and Canada.
While some areas of the market have experienced liquidity shifts, the bank notes that the broader financial landscape remains stable.
In equities, JPMorgan sees no notable liquidity deterioration in major S&P 500 or Nasdaq ETFs due to the DeepSeek event, even as the NVDL ETF (NASDAQ:NVDL) ETF “suffered a similarly large liquidity deterioration like the one seen last July."
However, the strategists highlight "a more long-standing deterioration trend in the liquidity of S&P 500 and Nasdaq ETFs (SPY (NYSE:SPY) and QQQ (NASDAQ:QQQ)) since the beginning of 2024."
Moreover, the market depth measure for S&P 500 futures has been weakening and is now "at the very low end of the post-pandemic range."
The FX market presents a more mixed picture. JPMorgan’s team says their liquidity proxy for the Mexican peso (MXN) has been low and volatile for a while, adding that “there has been little sign of additional deterioration as a result of the recent tariff threats."
The Canadian dollar (CAD), on the other hand, has seen a steady decline in liquidity since the US election, and the euro has followed a similar trend. Meanwhile, offshore Chinese yuan (CNH) liquidity has remained relatively stable.
“In terms of equities, there is little evidence of liquidity deterioration in Chinese, Canadian or Mexican equities as a result of the recent events,” strategists continued.
In the US Treasury (UST) space, strategists said USTs failed to track the liquidity improvement seen in Bunds when it comes to market breadth and market depth over the past year.
Meanwhile, liquidity conditions in commodities and credit markets appear robust, with no significant signs of weakness.
Overall, "financial conditions continue to support growth,” strategists noted. While certain pockets of the market show signs of deterioration, the broader picture remains resilient, with no indication of a widespread liquidity crisis.