Regarding China re-opening causing inflation, I find it interesting that people also used China's lockdown as source of inflation (people not going to work and supply chain disruption). Also, unlike other Asian countries that give out money directly to help the people, China doesn't do that. China stimulates generally by making borrow condition lose for the business so it's more of a supporting on the supply side. So, we only look at the demand side of the equation without looking at the supply side.
Thank you for sharing your thinking. Could you explain why liquidity as measured by Fed balance sheet - TGA - RRP should explain equity returns? The overlay chart makes a point, but over longer periods, the relationship is weaker. Some would argue it's better to look at duration supply (which shouldn't be affected by the TGA rundown) ...
Good question. Please note that I did not predict S&P going forward using liquidity. The relationship pre 2021 is not there. However since, it is very strong. So essentially you have a 1.5 year old backtest. May be coinicidental, may share causality with sth else or may diverge again tomorrow. I would therefore use net liquidity only as one of many indicators
What are you looking at for catalysts leading to a bounce in the US Dollar? I was thinking BOJ's decision last night, but that pop was quickly reversed. I find EUR/USD catalysts particularly wanting?
Regarding China re-opening causing inflation, I find it interesting that people also used China's lockdown as source of inflation (people not going to work and supply chain disruption). Also, unlike other Asian countries that give out money directly to help the people, China doesn't do that. China stimulates generally by making borrow condition lose for the business so it's more of a supporting on the supply side. So, we only look at the demand side of the equation without looking at the supply side.
Agree, should have deflationary effects in goods manufacturing
Thank you for sharing your thinking. Could you explain why liquidity as measured by Fed balance sheet - TGA - RRP should explain equity returns? The overlay chart makes a point, but over longer periods, the relationship is weaker. Some would argue it's better to look at duration supply (which shouldn't be affected by the TGA rundown) ...
Good question. Please note that I did not predict S&P going forward using liquidity. The relationship pre 2021 is not there. However since, it is very strong. So essentially you have a 1.5 year old backtest. May be coinicidental, may share causality with sth else or may diverge again tomorrow. I would therefore use net liquidity only as one of many indicators
Thank you!
What are you looking at for catalysts leading to a bounce in the US Dollar? I was thinking BOJ's decision last night, but that pop was quickly reversed. I find EUR/USD catalysts particularly wanting?
High short positioning and looks oversold. That in contrast to what it should do at this stage in cycle