Liquidity is a crucial aspect of any financial market, as it determines the ease with which buyers and sellers can transact. In recent times, liquidity has been a concern for many investors due to geopolitical uncertainty and other factors. However, recent data suggests that liquidity may be recovering, which could be a positive sign for market stability.

Top of Book (ToB) liquidity, in particular, has shown significant improvement after reaching low levels during the peak of geopolitical uncertainty. According to the latest data, ToB liquidity has increased by 141% compared to its 20-day moving average (20dma). This suggests that there is a higher level of liquidity in the market, which can make it easier for buyers and sellers to transact.

Another important aspect of liquidity is the relationship between exchange-traded funds (ETFs) and overall market volumes. ETFs are popular investment vehicles that allow investors to gain exposure to a wide range of asset classes, sectors, or strategies. As such, they can provide valuable insights into market sentiment and liquidity. Currently, ETF volumes as a percentage of overall market volumes are at 29%, which is down 8% from the 20dma. While this may seem like a significant decrease, it is important to note that ETF volumes have normalized after reaching high levels during the peak of geopolitical uncertainty.

In terms of flows, activity levels are currently at a 4 out of 10, indicating a relatively balanced market. However, there are some nuances in the data that are worth noting. For instance, institutional investors (LOs) have seen better performance for sales in certain sectors such as info tech, industrials, and real estate compared to demand in financials, communications services, and macro products. Similarly, hedge funds (HFs) have seen 3% better performance for sales, with supply in info tech, industrials, and comm services outperforming demand in cons disc, financials, and macro products.