In today’s briefing:
- Global Liquidity & Asset Allocation in 2023: Is QT Dead?
- ‘No,’ Money Supply Growth Is Not Your Ultimate Inflation Forecaster
Global Liquidity & Asset Allocation in 2023: Is QT Dead?
- How to Invest in 2023 and 2024 based on the evolving cycle of Global Liquidity, which likely bottomed in October 2022 and is now rising again
- QT is effectively dead. Major stock and bond markets may range in 2023, but certain areas, like cyclical, commodities and EM, will show strong gains
- Three major changes are driving Global Liquidity higher: Fed stops QT, PBoC eases liquidity aggressively and collateral supply improves as bond volatility drops. MOVE index important
‘No,’ Money Supply Growth Is Not Your Ultimate Inflation Forecaster
- Eurozone M1 Money Supply growth turned negative for the first time in history in January, triggering a wave of deflation forecasts.
- But looks can be deceiving. The relationship between Money Supply growth and Headline and Core inflation is far from perfect, with just one-third of CPI variation explained.
- The recent inflation stickiness substantiates the hypothesis that other factors are at work and that the ECB must continue hiking until it breaks something, most likely the economy.
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