Latest Global Liquidity Index (GLI) January 2015

by Michael J. Howell12. January 2015 19:21
Global Liquidity is starting 2015 on a downbeat. Our GLI index of liquidity conditions stands at 41.8 or down from its 45.9 end-November 2014 reading. Lower Global Liquidity warns of future financial and economic risk. Current levels of liquidity do not signal recession but they do point to economic slowdown over coming months and greater market volatility. Consistent with this picture Treasury yield curves are flattening and corporate credit spreads are widening. Our models are flagging a 'Risk Off' regime.

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Global Liquidity Update

GLI Latest

by Michael J. Howell10. July 2014 16:22
The Global Liquidity Indexes (GLI) measure broad monetary flows through World financial markets. They are leading indicators of future asset prices and economic activity. Our 80 country GLI aggregate inched down in June 2014 to an index of 47.8 ('normal' range 0-100) from 48.3 in May. The GLI can be broken down into an Emerging Market (EM) component, which is low but managed to rise to an index of 24.1 last month and a Developed Market (DM) component, which still stands at high index levels of 65.4. The DM index dipped a tad last month but is largely unchanged since end-2013, whereas the EM index gained 3.7 points from May and is 7.8 points up over six months.

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Global Liquidity Update

May 2014 Release Global Liquidity Indexes GLIs

by Michael J. Howell13. May 2014 17:15
The Global Liquidity Cycle continues to slip lower according to our latest GLI estimates. End-April 2014 data show a move down to 45.8 from 52.8 ('normal' range 0-100). Global Liquidity is therefore below trend and decelerating. Risks are rising. Typically, market volatility tends to pick up within six months. The causes are widely-spread: Central Bank liquidity injections tightened again to 33.4 in April, with almost two-thirds of policy-makers by number now running 'tight' quantity policies. The most active of the key Central Banks withdrawing net stimulus last month were the US, Japan and China.

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Global Liquidity Update

March 2014 - Latest Global Liquidity Data (GLI)

by Michael J. Howell12. March 2014 19:37
Headline end-February 2014 GLI (Global Liquidity Index) data confirm a clear inflection in overall data and, perhaps, even in the more buoyant Developed Economies, too? Admittedly the GLI ticked up slightly through the month to 53.4 ('normal' range 0-100) from a sub-par 47.9 in January. World Liquidity may still be just above its average; however, these values stand well-below the recent 61.9 peak. Excluding EM, the picture is far better, with the GLIX (excluding EM) rebounding to an index value of 75.3 or again close to its recent 76.1 December 2012 peak. Emerging Market liquidity remained at a low index value of 13.3, likely foreshadowing an earnings recession across the sector.

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Global Liquidity Update

Global Liquidity...What A Year!

by Michael J. Howell31. December 2013 12:20
Latest Global Liquidity Index (GLI) hit a value of 59.8 at end- November 2013 ('normal' range 0- 100). Yet Developed market liquidity hit a whopping 76.7. EM liquidity slumped to only 19.2, dragging back the global total. There are two Worlds out there and the big event in 2013 was not the fear of Fed tapering but the reality of Chinese tapering. The strength of DM liquidity coes not from generous Central Banks but from a resurgent private industrial sector. This may be confirmed by the parallel leap in real interest rates to break their decade-long downtrend. Capex looks set to pick-up in 2014 giving economies an extra spur but in the process depleting the pool of financal liquidity. Given that the GLI is losing momentum, this combination of high but decelerating liquidity conditions moves us out of Calm and puts us into the Speculation phase of the cycle. This eponymous investment regime is associated with stronger cyclical growth, rising interest rates and outperformance from cyclical value sectors, like industrials. 2014 will be a profitable year, but it will also be a more volatile one.

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Global Liquidity Update

Latest Global Liquidity Data - August Update

by Michael J. Howell14. August 2013 09:40
The latest (end-July) Global Liquidity Index (GLI) hit 73.8% against a 'normal' 0-100 range. This is equivalent to US$145 billion pouring into World financial markets. The distribution of liquidity remains very uneven. The leading markets were again the US, Britain and Japan, with liquidity in the Eurozone and Emerging Markets weak. The data show strongly divergent trends in private sector liquidity, and warn of heightened forex market volatility.

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Global Liquidity Update

Publication and Mid-Month Update

by Michael J. Howell24. January 2013 18:35
Latest Global Liquidity Update Report and First Quarter Outlook slide pack published today.... What have we seen so far in 2013? Weak Eurozone economic data; more evidence that ECB is cutting back its liquidity injections; announcement that Japan is moving to a 2% inflation target, alongside a record 2012 trade deficit, and decent US and China economic data, plus firmness in commodities and evidence from the breakout in the Dow Transportation Average that investors are moving back to cyclicals. Yield curves are inching upwards, gold is wobbly and the dollar is muscling forwards. To us this data confirms the view from liquidity data: hold your nose and buy cyclicals, especially EM; reduce gold; watch out for another Euro Crisis, and take a bet on structural change in Japan.

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Global Liquidity Update

2013: Big Questions For The Big Consensus

by Michael J. Howell19. December 2012 15:41

The first flush of November liquidity data allows us to reassess 2013 prospects. Hard evidence of extra cash inflows are thin. Latest data show the aggregate GLI (Global Liquidity Index) slipping back to 46.5 from a value of 57.0 in October, 2012 ('normal' range 0-100). The bulk of this setback came from lower Central Bank Liquidity in both the Eurozone and Japan in November. BoJ liquidity injections measured at an index value of 27.9 are proving remarkably weak in the face of persistent criticism of its policy and expectations that its hand will be 'forced' towards greater ease after the early December Election. Given that latest capital flow data highlight a sharp net outflow of money from Japan, this fact by itself would normally (and may be currently does) signal a domestic monetary tightening in response. Therefore, talk of a further flood of Yen from re-starting the printing presses could prove significant and highly disturbing for the forex and JGB markets in 2013. The long-threatened sell-off in JGBs could prove the key event for global bonds because if Japan can escape from deflation, so can the other economies.

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Global Liquidity Update

A Glorious Fall

by Michael J. Howell2. October 2012 12:00

QE3 arrived essentially on cue and within the ‘normal’ 15 -18 months from the date that the last (QE2) easing ended. This Mshaped pattern of liquidity supply has occurred several times before. Commodity markets are the clear winners from every QE that we have studied. Bonds have lately been the most frequent loser. The discrete pattern of finite quantitative easings (QEs), followed by pauses, explains the recent sequence of ‘Risk On/Risk Off’ markets.

The appearance of QE3 likely heralds a renewed ‘Risk On’ phase.

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Global Liquidity Update

The M-Wave: Where Now? Higher?

by Michael J. Howell2. September 2012 12:04

We have long been taken by the idea of an M-shaped financial/investment cycle. This simple prognosis from 50 years of monetary and credit history suggests this repeating pattern plays out over a ten -year period.

In short, we get two asset booms per banking crisis, with these up-legs separated by an 18-month/2-year sideways period, characterised by ranging markets, sluggish economic growth and low inflation.

Our original timeline placed this liquidity pause from Q1 2011 to Q3 or Q4 2012, with the endgame dependent on Central Banks agreeing to another round of QE (quantitative easing).

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Global Liquidity Update

 
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