As most readers have doubtlessly surmised, the tech-driven rally in US equities has done exactly nothing to dispel the concerns of several well-known top-down strategists on Wall Street.

Indeed, the further stocks run, the more cautious the likes of Morgan Stanley’s Mike Wilson and JPMorgan’s Marko Kolanovic generally are, and both reiterated their concerns this week as the S&P eyed an ostensible bull market.

“We retain a cautious stance on risk assets in our model portfolio as a looming liquidity contraction is added to recession concerns,” analysts led by Kolanovic wrote, in a weekly update.

Late last month, the bank’s Nikolaos Panigirtzoglou cautioned that thanks in large part to the oncoming tsunami of T-bill issuance, broad liquidity could decline by more than 6% on a YoY basis, a meaningful contraction which, when measured from year-end 2022 and extrapolated through the end of this year, comes to around $1.7 trillion. BofA’s Michael Hartnett conjured a similar estimate+ last week.

For Kolanovic and co., the liquidity drain is just one more prospective stumbling block for risk assets. “In YoY terms, this would represent the worst US broad liquidity contraction since that seen after the Lehman crisis,” they wrote. “To us this is another justification for a cautious stance.”

Note from the figure on the left above that a JPMorgan measure of global economic surprises has plummeted of late. To emphasize: That’s surprises, so it’s relative, but it’s concerning nonetheless.

“While in absolute terms, activity indicators might look OK, relative to expectations they have been underperforming significantly,” Kolanovic remarked, adding that although the US labor market continues to hold up, that just makes the case for tighter Fed policy, which is obviously a headwind for equities, and particularly for those sensitive to higher rates.

In the same piece, JPMorgan flagged the recent re-rating in the Nasdaq 100, which is trading on a 26x forward multiple. “The re-emergence of the retail impulse into tech stocks in May add[s] to concerns about ‘frothiness’ created by this year’s A.I. hype,” Kolanovic said. “One only needs to look at the P/E multiple of the Nasdaq 100 to be concerned about current tech valuations.”