Global View November 2015: How Likely Is A 2016 Global Liquidity Shock?

Risk officers should beware. At the very least, holding less risk when the Fed starts to hike rates seems prudent. More generally, looking 6-12 months ahead, the odds of a negative shock to Global Liquidity will remain high. Ironically, they are probably higher than in early 2008, because then having fallen sharply through 2007 the US currency was not strong; most economies seemed robust; policy-makers, led by the US Fed, apparently were on top of (or so they claimed) the growing funding problems and no one thought that the US Treasury would allow a key financial counter-party (Lehman) to fail. Today, the financial planets line up more ominously. Economies are either bafflingly slow speed, or like the Eurozone heavily lop-sided.