You might as well face it, markets are “addicted to gov.” Government monetary interference, that is. Government money printing and massive Federal spending.
According to Goldman calculations, $350BN of liquidity (in USD terms) was added in November from the G4 central banks + the PBOC was nothing short of a fire hose.
Looking forward over the year end and at the start of 2024, Goldman thinks that the US can keep adding liquidity via high bill issuance and RRP withdrawal over the next couple of months (something we discussed last month in “How Treasury Averted A Bond Market “Earthquake” In The Last Second: What Everyone Missed In The TBAC’s Remarkable Refunding Presentation“), while the dollar contribution to benign liquidity conditions could face some headwinds due to the risk of pricing out of some of the March Fed cuts as a result of the strong positive FCI impulse in November.
Goldman’s one-factor model for risky assets based on the liquidity cycle suggests that US IG and EM hard currency debt are cheap and the bank’s STS FX carry and Brent Vol Carry indices have under-performed the benign liquidity environment and may catch up the next two months.
Meanwhile, while John Kerry pushes for ending ALL coal powered plants (good luck charging the thousands of EV charging stations on wind/solar power!), China is building NUCLEAR plants. While US green wimps (Kerry comes to mind) whine whenever nuclear plants are mentioned for the US.
