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- Free clip from 22 Oct webinar
- The fuel for the rally comes from a mix of fiscal stimulus being channelled into fund flows and financial sector leveraging
- But cracks are beginning to appear, from First Brands, to doubts about circular financing in tech, to the flight into gold
- To understand the limits of leveraging, look at the fund flows
- First ten minutes free to view; full webinar only for clients with Group Webinar and One-on-one subscriptions
- The fuel for the rally comes neither from rates, nor from fundamentals, nor from central bank liquidity
- It stems from a mix of fiscal stimulus being channelled into fund flows and financial sector leveraging
- The resultant mix of too much money chasing too few assets both suppresses risk premia and postpones credit events – to a point
- But it remains critically dependent on the continued credibility of the borrowers and the system
- The recent “bond rout” would be better described as a long-end bond technical
- It reflects dwindling pension demand more than existential fears around inflation or debt sustainability
- Governments should reduce their long-end issuance accordingly
- Investors should continue to hold steepeners until they do – without necessarily being short duration
- The more Trump exerts personal control over US organs of state, the more the US’ real power is eroded
- The main mystery is why this is still not being priced into markets
- Part of the answer revolves around the amorality of capitalism, and prospects for more easy money
- But much is attributable to the extreme and abrupt nature of credit repricings
- Commentators argue increasingly that tariffs matter little, and for the return of US and tech exceptionalism
- But this risks retro-fitting the explanation to the price action
- An examination of the monetary data points to the exceptional way in which fiscal stimulus has been fuelling equities
