Author: Matt King

Seriously and literally

• Markets’ response to the evident risks has thus far consisted primarily of risk rotation
• This seems increasingly likely to evolve into full-fledged risk reduction
• That it has not done so to date is thanks not only to dwindling hopes that Trump is bluffing, but also (yet again) to support from central bank liquidity

QT and the debt ceiling

• Fed Minutes suggest pausing QT “until” resolution of the debt ceiling
• This would amplify market volatility, not reduce it
• Either the Minutes are poorly drafted, or else reflect deeper misunderstandings of how balance sheet policy affects markets

When shocking behaviour meets shock-proof markets

• US economic exceptionalism remains alive and well
• But in markets, many Trump trades have been faltering
• Markets’ overall behaviour remains Panglossian thanks to a combination of falling real yields, a temporary boost from CB liquidity, and animal spirits
• But we see reasons to doubt the longevity of all three

Kantro vs King: 1H Outlook Debate

Free clip: When the positives are all priced

• Free excerpt from 22 Jan webinar
• The US economy is indeed exceptional
• But the performance of its markets owes just as much to an extraordinary funnelling of fund flows
• Dissecting the drivers of these flows sheds crucial light on the durability or otherwise of the risk rally
• Free to view by all; full replay available only to clients with Group Webinar or One-on-One subscriptions

Replay: When the positives are all priced

• Full replay of 22 Jan webinar
• The US economy is indeed exceptional
• But the performance of its markets owes just as much to an extraordinary funnelling of fund flows
• Dissecting the drivers of these flows sheds crucial light on the durability or otherwise of the risk rally
• Open to clients with Group Webinar or One-on-One subscriptions; Read-only clients have access to first section only

When the positives are all priced

• Where consensus sees US exceptionalism
• We see a funnelling of fund flows
• Here’s how to trade it

Some shameless self-promotion (free to view)

• A chart of publication titles against price action

What role for liquidity in 2025?

• It is tempting to look at the performance of US equities in 2H24 and conclude that central bank liquidity no longer matters for markets
• But a closer examination of both other markets and shorter timescales suggests this would be a mistake
• It instead highlights the predominant role currently being played by fund flows and US exceptionalism
• While it is possible to paint scenarios where liquidity contributes to a melt-up in risk in early 2025, on balance we see it as one of a number of reasons to be skeptical of the bullish consensus

Ten reasons to take profit

• Many fundamental indicators show a sudden deterioration
• In combination with markets’ Panglossian interpretation of prospects under Trump, these represent reasons to take profit
• Too much of markets’ performance comes from a fiscally-driven surge in fund flows