Research

To view research in full – and see the charts properly – you need a paid subscription.

Short-term liquidity alert

  • Over the past week central banks drained $300bn in liquidity: as much as in April and more than in August
  • While this was partially reflected in the post-Labor Day selloff, the risk is of more to come
  • Resilient fund inflows are a partial panacea, but risk simply lagging
The great wave of global liquidity passes

Read more »

Please stop meddling with my markets

  • The best explanation for markets' summer slump and rapid rebound lies neither with rates nor with the economy
  • It sits - yet again - squarely with swings in central bank liquidity
  • While the resilience of fund flows and cutting of leveraged positions is somewhat reassuring, on balance we still see the support as temporary
cb liquidity vs spx rolling 7d

Read more »

Should you believe the bounce?

  • Attempting to explain the market bounce in terms of economic data fails to do justice to the prior sell-off
  • Flows & liquidity indicators once again shed light on the moves
  • On balance they leave us skeptical

Read more »

Mind the exits

  • The increase in VaR is sparking a broad-based, and potentially indiscriminate, unwinding of leveraged positions
  • The first question is which other leveraged positions are at risk
  • The second question is whether fund flows will hold up
  • Central bank rescue easing or liquidity packages are likely only with a much bigger sell-off or more obvious signs of systemic leveraged distress

Read more »

What rotation can’t cure

  • The violent rotation in equities is sparking hopes of a fundamentally-driven rally
  • It has been aided by record fund inflows and a spike in CB liquidity
  • But the details of both the flows and the liquidity leave us skeptical
  • Expect the rotation to continue, but not the rally

Read more »

When star stands for confusion

  • Recent statements are a reminder of the importance of neutral rates for policymakers
  • But they also illustrate confusion - not only about the level of r*, but even as to what it is supposed to be measuring
  • At the heart of the confusion lies a failure to distinguish between the impact of balance sheet on markets, and of rates on the economy
  • This potentially leads to very different conclusions for r* and policy
r-star down, return on capital up

Read more »

Seven lessons from complexity

  • Markets and economies should be analyzed as 'complex systems'
  • Their fat tails and emergent behaviours fit poorly with traditional linear economics, but very well with complexity modelling techniques
  • Lessons from other complex arenas apply equally well to investing
Under conventional economics, volatility shouldn't form clusters - but it does

Read more »

Short-term exuberance alert

  • We have been arguing markets face greater risk of melt-up than melt-down
  • But the speed and extent to which many levels are deviating, not only from fundamentals but even from many technicals, is striking
  • Expect fund inflows to continue to swamp such concerns - but watch for any sign of faltering
trailing 12m cb liquidity down, equities up

Read more »

The asymmetric Fed

  • The significance of last week's FOMC lies neither with the rate view, nor with the earlier, larger taper of QT - mildly bullish though both of these are.
  • It comes instead from the stark asymmetry of the response function which was described.
  • While the true test remains with the details of the liquidity outlook, in conjunction with the Treasury refunding this opens the door to a continued cross-asset rally through Q2.
cash assets at small and large us banks still far from 2019 lows

Read more »

satori insights logo

© 2024 Satori Insights Ltd

satori insights full logo transparent

Login successful.

Continue reading