as the meat of earnings season begins it’s worth noting what investors have learned so far the short version is apart from a few isolated companies cough netflix cough not a whole lot the projected rise in sp 500 earnings per share this year stands at 89 compared with 81 at end of march according to sp global market intelligence but even as expectations toward earnings have improved the market has struggled with the sp 500 spx down 6 this month so far so what’s going on well reserves at the fed fell by 460 billion last week which according to citigroup was the biggest weekly drop ever so let’s hear what that means from michael howell dubbed the godfather of global liquidity and the chief executive of crossborder capital a boutique he formed in 1996 after heading the research teams at baring securities and salomon brothers howell explained to jack farley of blockworks macro that by global liquidity as opposed to market liquidity he means the ability to change investment positions relatively easily “if you put more liquidity into a financial system what’s happening is you are decreasing systemic risks because it’s much easier for any particular entity to get funding and if funding is easy people will move along the risk curve into higher risk instruments” he said the central banks through monetary operations control a large part of liquidity he also monitors the actions of commercial banks shadow banks big corporations such as microsoft and alphabet and crossborder investors and in response to surging inflation some 95 of central banks around the world are tightening the federal reserve in the minutes from the last federal open market committee meeting outlined a plan to reduce its balance sheet by some 2 trillion howell says a normal tightening cycle would lead the sp 500 down by around 15 if a recession is thrown on top that’s a 30 drop and if there’s a banking crisis on top of that there’s a 50 slide “i don’t think we’re going to get the third i think we’re getting more than the first so i’m plumbing for the middle which is about a 30 correction from the peak to the low” he said since there’s already about 10 of the decline from the peak howell says there’s another 20 drop to come “the point to remember about the financial system is that contrary to what the economics profession says and the economic textbooks spell out the financial system is much less a new financial system than it is in reality a refinancing system” says howell with some 300 trillion of global debt and the average maturity about five years some 60 trillion needs to refinanced every year that declining liquidity has already been seen with the collapse in the japanese yen usdjpy soaring treasury bond yields and spiking commodity prices the increased volatility makes it more difficult for people to borrow against that collateral as lenders will require more margin howell says his index of liquidity is on the verge of entering the “turbulence investment zone” howell also said that market leadership utilities and brand names outperforming cyclicals and techs and the yield curve are saying that investors want safety and that a recession is increasingly likely twitter’s twtr board has suddenly warmed to elon musk’s bid now that it has financing which says a deal could be agreed as early as this week the wall street journal reported citing people familiar with the matter china’s capital of beijing appears to be moving toward the strict lockdowns seen in the financial hub of shanghai in response to a new covid19 outbreak the european parliament and european union member states over the weekend agreed on a proposed digital services act that will force tech companies to take more responsibility for the content on their platforms french president emmanuel macron comfortably defeated his farright challenger marine le pen the german ifo business climate index edged up in april from a 14month low in march us stock futures es00 nq00 were pointing to another sharp decline after friday’s 981point slide in the dow jones industrial average djia crudeoil cl futures slumped and the yield on the 10year treasury bxtmubmusd10y slipped to 282 here were the most active stockmarket tickers on marketwatch as of 6 am eastern there’s now a bar that only shows women’s sports need to know starts early and is updated until the opening bell but sign up here to get it delivered once to your email box the emailed version will be sent out at about 730 am eastern want more for the day ahead sign up for the barron’s daily a morning briefing for investors including exclusive commentary from barron’s and marketwatch writers