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- Free-to-view replay of first segment of 16 Jan webinar
- Why strategists struggled in 2023
- A better way to think about markets
- Implications for 2024
- Full replay from 16 Jan webinar with Q&A
- Why strategists struggled in 2023
- A better way to think about markets
- Implications for 2024
- Open to clients with Group Webinar or One-on-One subscriptions, and to the press
- The remarkable performance of risk assets in 2023 is not primarily due to the growing likelihood of a soft landing
- It instead reflects markets being buffeted by extraordinary amounts of central bank liquidity
- For now, those technicals remain positive, but beyond Q1 they should fade or reverse
- Underlying momentum in growth, earnings and inflation – beyond sticky supply-side effects – is significantly weaker
- Hark! The VC angels sing
- God rest ye, merry crypto bros
- While PMs watched tech stocks take flight
- I’m dreaming of a tight market
- To be sung, please, in a spirit of global harmony
- The biggest surprise of 2023 was not the resilience of the US consumer
- It was that central banks added nearly $1tn in liquidity, rather than removing $1tn as had been widely expected.
- This swing alone is worth 20% on equities – almost exactly the YTD gain in the S&P.
- We think 2024 will show central banks have overtightened rates whilst simultaneously overstimulating risk assets.
- But we also fear their misunderstanding of the dynamics means they may yet do more of both.
- The rally does not reflect the likelihood of a soft landing
- It is the direct consequence of a surge in Fed liquidity
- Widespread misunderstanding of these dynamics increases the likelihood of more rate rises and a harder landing later
- Poor risk asset performance in Sep/Oct reduces gap to CB liquidity
- Fed $300bn reserve increase over past eight weeks helps explain renewed rally in S&P
- Conversely, despite talk of stimulus, China liquidity injections remain lacklustre
- Liquidity outlook still driven by RRP – and is much less negative than might be expected
- Persistent fiscal deficits are increasingly cited as the #1 reason to short bonds
- But the historical record is remarkably and perplexingly clear
- High debt levels, and even high fiscal deficits, have historically been associated with bond yields falling, not rising
- Only in part does this reflect factors like financial repression
- It is also due to the counterintuitive nature of the credit creation process itself
