I've been staring at a chart for a long time recently—the "Excess Liquidity as a Percentage of Bank Deposits." Essentially, this thing is a thermometer measuring whether there's money in the market. The Federal Reserve recently injected another $40 billion into it, which in essence is loosening liquidity conditions. But looking at the current ratio, it has already fallen to around 15.7%, well below the historical average of 20.6%, indicating a quite tight situation.

Looking back at data over the past decade or so, each period has been quite interesting:

**2009 to 2013**: After the financial crisis, QE was aggressively implemented, and liquidity climbed from just over 12% to above 20%, gradually restoring market confidence; **2014 to 2018**: tightening began as QE stopped and balance sheet reduction started, with less money in circulation, dropping to 11% by 2019, which led to the repo market crisis; **2020 and 2021**: pandemic hit, and the Fed launched unlimited QE, pushing liquidity above 32% in 2021—asset prices soared during that time; **2022 to 2024**: another scenario, with rate hikes and balance sheet reductions, high inflation pressing down, reserve balances plunging, and excess liquidity crashing from its peak to over 19% by the end of 2024, roughly back to the historical average.

And now? As we start 2025, the money in the banking system is so tight that it's only 15.7%, significantly below the average line. Historical experience tells us that whenever liquidity begins to rise from the bottom, risk assets usually experience a recovery rally.

**In plain terms**: this round of liquidity has already fallen to a historically low level, and signs of policy easing are emerging. The key next step is to watch when it truly turns upwards—because that inflection point is often a signal that risk assets are shifting from weakness to strength.