I'm beginning to see charts & other signals pointing to slowly dwindling market liquidity. I haven't fully made sense of it yet, but the trend is worth watching closely. Posting the charts/signals I find on a rolling basis below:
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Spreads of even the top 5 largest, most liquid names have seen spreads trend upward since March 2020, with material spikes during selloffs:pic.twitter.com/0wzQyjjYBU
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Liquidity provider equity returns have materially outperformed the broader averages since the beginning of 2020. If liquidity is becoming harder to find, it follows that the firms supplying this liquidity can charge more for their services & outperform.pic.twitter.com/eOoIfTXNds
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Aggregate options bid/ask spreads are widening in 2021 even as retail slows down & posted notional size grows:pic.twitter.com/rsMgUbE0IG
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