In today’s briefing:
- What Really Matters Is Global Liquidity…But It Looks Set to Zag Before It Zigs Higher
- A Reply to Grantham’s AI Warning
- EQD / NSE Volatility Update / 11-Mar-24 to 15-Mar-24
- HEW: Keep Kicking the Cutting Can
What Really Matters Is Global Liquidity…But It Looks Set to Zag Before It Zigs Higher
- The main driver of asset prices looks set to stall, albeit temporarily. Global Liquidity is at a new all-time peak, but it is flat-lining
- Global Liquidity compromised by a stumbling US Fed as it copes with the errant RRP and TGA, and by an erratic People’s Bank of China. Q2 could prove tricky
- Look to diversify elsewhere. Commodity markets are on the move. But strong economies do not always have strong financial markets
A Reply to Grantham’s AI Warning
- Well-Known value investor Jeremy Grantham recently sounded warnings about an AI bubble.
- While we respect Grantham’s views, he suffers from the value investor problem of being too early and overly reliant on valuation for his views.
- The market is starting to blow a bubble in AI-related plays, but we think it’s far too early to declare that a top is near.
EQD / NSE Volatility Update / 11-Mar-24 to 15-Mar-24
- Market regulator intervenes to curb excess leverage in equity markets. IVs recover from last week’s selloff but bound by 12-16% range.
- Vol Regime Model clearly signals “High & Down” state, projecting a slow grind lower for IVs
- Shape of the vol surface is indicative of a market well positioned to handle corrections
HEW: Keep Kicking the Cutting Can
- US data remains resilient, with CPI and PPI inflation surpassing expectations, while UK activity data, although excessive, meets or falls below expectations. Rate cut pricing continues to be postponed by markets.
- Upcoming monetary policy decisions are expected to officially confirm the delay in dovish actions. The Federal Reserve is not expected to cut rates, and the median rate dots may increase.
- The Bank of England is also expected to maintain its current stance, with February’s disinflation not likely to affect this.
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