S&P 3,500 By Year End

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"Don't fight the Fed" echoes through the financial media, Wall Street, and in the minds of retail and institutional investors. It pertains to Fed-generated liquidity and is often the sole basis for investors to chase bull markets when the Fed employs easy monetary policy. Unfortunately, some investors forget the phrase is equally meaningful when the Fed is not friendly to markets.

I have developed a model to track Fed liquidity, allowing us to quantify the Fed's influence on the S&P 500.

Before unveiling my liquidity formula and its forecast for the S&P 500, it's essential to discuss the three primary drivers by which the Fed is influencing liquidity: reverse repurchase (RRP), Treasury general account (TGA), and the Fed's balance sheet.