U.S. Excess Liquidity Growth Leads S&P 500 Returns This chart suggests that M2 money supply to nominal GDP ratio leads S&P 500 returns by one year. Is the S&P 500 vulnerable to a drop, followed by a recovery? Picture source: Oxford Economics, Macrobond
Liquidity Premium: Investment Grade vs. High Yield Bonds The chart shows that the premium provided by illiquid IG and HY bonds has been drifting wider. Picture source: Goldman Sachs Global Investment Research
Liquidity in U.S. Equity Futures Liquidity in U.S. equity futures collapsed in early 2018. It has remained at very low levels. Keep in mind that the lack of liquidity could lead to violent market moves. Picture source: Deutsche Bank
S&P 500 Index vs. Global M1 Liquidity Another good correlation between the S&P 500 Index and global M1 liquidity, while the Fed plans to stop quantitative tightening. The money supply M1 is the amount of effective money in the economy. Picture source: Nordea and Macrobond
International Liquidity by Country – Total Reserves Excluding Gold, U.S. Dollars USA holds $115 billion and China holds over $3 trillion in reserves. Picture source: howmuch.net
Why Trade Tensions Are Not Driving the U.S. Stock Market? Because many Unicorns are going public in the United States this year. Secondly, U.S. banks are healthier than ever and liquidity conditions are quite good in the U.S.. So all in all, that’s far more important than trade tensions. Picture source: Bloomberg
