Valuation – Shiller Cyclically Adjusted Price/Earnings Ratio Over the last 100 years, stock market crashes have tended to follow liquidity-fueled booms. Image: Morgan Stanley Wealth Management
G10 Central Bank Expected Average Monthly Quantitative Easing (QE) in 2021 Central banks are expected to provide more liquidity to markets in 2021. Image: Morgan Stanley Research
Emerging Markets Debt Yield The cost of servicing emerging markets debt denominated in U.S. dollars has fallen to almost 4%, thanks to global central bank liquidity and the weakening of the U.S. dollar. Image: Morgan Stanley Wealth Management
Flows – IG Bond Funds/ETFs and Prime Money Market Funds From record outflows to large inflows, the Fed has solved the liquidity crisis so far. Image: BofA Global Research
S&P 500 at 3000 and U.S. Government Spending as % of GDP According to BofA, maximum government spending, maximum liquidity and the current fiscal stimulus explain why the S&P 500 is at 3,000. Image: BofA Research Investment Committee
Gold, U.S. Trade Weighted Dollar and S&P 500 In 2008, gold outperperformed after the Fed stepped in and removed liquidity constraints. Image: Goldman Sachs Global Investment Research
Global PMI Manufacturing and Rolling Yearly Change in the Balance Sheet (FED, ECB, BoJ, PBOC) This chart shows the correlation between the change in global liquidity and the global PMI manufacturing. Image: Swedbank Research
Bank Reserves and S&P 500 J.P. Morgan suggests that Fed-injected liquidity is not the reason for the rise in the valuation of risk assets. Image: J.P. Morgan
U.S. Commercial and Industrial Loans Outstanding Business loan growth is slowing down, despite Fed easing. Currently, liquidity is going into the financial markets, but not into the real economy. Image: Pictet Wealth Management
S&P 500 Trading Volume The decline in trading volume of the S&P 500 could pose risks for investors during the next selloff due to the lack of liquidity. Image: MarketWatch