What Are Global Money Flows Telling Us?

TL;DR

The market is experiencing a loss of momentum as global liquidity support wanes and real yields surge, causing concern for risk assets.

Transcript

foreign money flows telling us hi everyone Welcome to the Real Vision Daily Briefing with me today is Geo Chen director of three keys hi Geo it's great to see you again hey Maggie good to be back uh Geo joins us from Singapore so this is a heavy lift for him and we really appreciate it uh but there's no sleep for anyone it seems like these days Geo... Read More

Key Insights

• 🥺 The market received a temporary boost from the China reopening and liquidity surge, but this support is fading, leading to a loss of momentum.
• 🖐️ Global liquidity, including from central banks, plays a crucial role in driving risk assets.
• 📼 The surge in real yields has caused discomfort for risk assets, which may impact market performance.
• 🇨🇳 Concerns over tension between the US and China and potential regulations impacting investment in China add to market uncertainty.
• 💨 Investing in cash and T-bills can be a way to generate yield and provide dry powder during uncertain times.
• 🥺 Government bond markets, especially in the US, face risks due to potential spending and inflationary pressures, which may lead to higher yields.
• ❓ While the market may go through periods of volatility, a sustained crash is not expected due to limited downside pressure.

Questions & Answers

Q: What is the current view of the market and macro framework?

The market is losing momentum as global liquidity support wanes, and real yields have surged, causing discomfort for risk assets.

Q: How does global liquidity affect risk assets?

Risk assets tend to closely track global liquidity, and a reduction in liquidity support can weigh on the market.

Q: What factors could lead to a change in Fed policy towards yield curve control?

If inflation and wage data prove to be higher than expected, the Fed may be forced to change its policy towards yield curve control.

Q: How does tension between the US and China impact the market?

Tension between the US and China can lead to increased regulations that restrict investment in China, potentially impacting Asian markets.

Summary & Key Takeaways

• The market received a boost in Q4 2021 due to the China reopening and liquidity surge, but this adrenaline shot is fading, leading to a loss of momentum.

• Global liquidity, including from central banks like the Fed and BOJ, is rolling over, which closely tracks risk assets.

• Real yields have surged, causing discomfort for risk assets and putting pressure on the market.