Something to ponder – we are 12 months on plus a bit from central banks going “all in”…..so YOY money supply growth is now actually slowing down quite markedly – for the Fed to cause a reacceleration they would now have to actually expand QE , which is obviously the opposite of their intention. So perhaps equities may start to struggle and with the Fed implicitly tightening (by not increasing asset purchases on a larger monetary base) the dollar starts to perform better and does not need higher treasury yields to do so?- though a peaking of inflationary expectations in the US would also imply real rates may rise too?. Perhaps this is what the gold price is telling us? and the better performance of growth and consumer staples versus value?
Michael Howell of Cross Border Capital always had a nice line in presentations …..”what makes equities go up ?” , someone says “fundamentals” and he smiles and says ……”money”…… it may be seasonal but it feels like liquidity conditions are peaking out? a stronger USD would hardly be helpful either……
Good luck to all in markets….
Thank you for this thought-provoking email. It is true that year over year money supply growth is contracting. There was no way money could continue to grow at such a prodigious rate compared to the 2nd quarter of 2020.
Month over month money supply growth is still rising at around 16%. That range (between 9% and 16%) has been held for the last eight months and is faster than at any time other than a crisis in the last couple of decades.Click HERE to subscribe to Fuller Treacy Money Back to top