Global Liquidity Updates

The interconnectedness among USA liquidity, China liquidity, and global wealth reflected in the MSCI World Index is illustrated in our chart below.

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Additionally, our team has constructed a stress index demonstrating financial market turbulence in the past and present.

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The 12-month liquidity percentage change in the USA has experienced significant fluctuations, especially hitting noticeable peaks around 2015 and early 2020, contrasting with the more stable liquidity changes in China.

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The MSCI World Wealth Index has shown high volatility, notably around 2015, 2018, and early 2020.

Moments of heightened financial pressure, vividly marked in red, are closely intertwined with substantial drops in both liquidity and global wealth, as evidenced during the early financial turbulence of 2020 brought on by the COVID-19 crisis.

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The relationship between liquidity shifts and global wealth is clearly observable; upticks in liquidity generally align with global wealth increases, while liquidity downturns often precede or align with wealth declines.

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The stress index is designed to maintain an average value of zero, symbolizing the normalcy of financial market conditions.

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Market stress can be characterized as volatility, uncertainty and risk.

A zero reading implies standard market stress levels, while negative values indicate lower stress, signaling market stability.

On the contrary, positive values above zero signify increased stress levels, reflecting heightened market turbulence and potential financial instability.

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By carefully observing the stress index, investors can predict market shifts while enhancing returns through effective risk management amidst market volatility.

Central banks are keeping liquidity tight, but a significant inflow of ⁠liquidity is anticipated in the coming months.

Worldwide, central banks are closely monitoring the Fed's policy moves, and it's likely that Yellen will start draining the TGA in sync with the Fed adding liquidity.

As mentioned earlier, major player China and other central banks are waiting for the US, before doing big injections.

It's truly a calm before the storm kicks in.

Global Liquidity decreased by $549B, standing at $127.56T (-0.29%).

Over the past week we can see China has continued to make a notable move with its liquidity injections via Repo skyrocketing by 509.33%.

Also showcasing our MOVE index, which has seen a 3.68% increase.

But why is the MOVE index an important measure to track?

The unprecedented growth of our MOVE Index data reveals the movement of investors towards safer assets as opposed to riskier ones, the preferred ones being U.S. Treasury bonds.

This "flight to safety" approach can cut down the liquidity of the riskier asset classes, as the funds get diverted to the more stable investments.

It can be observed that the levels of liquidity increase in China, but some concealed forces can cause its decrease.

From what we comprehend, the MOVE index has induced Global Liquidity stagnation.

Our 3M and 12M RoC has also remained stagnant however still continuing to show a bullish agenda.

China pretty much surprised the world by cutting interest rates, in order to support its economy.

While they likely will not have a big impact on the markets, it's good to see the first move from the other side of the world.

More cuts from China are expected in the upcoming months, especially since the long awaited FED might start cutting rates as well in September.

There could even be a surprise cut from the FED in July, if Q2 GDP and Core PCE comes lower than expected.

From a dollar perspective, Global Liquidity decreased by $598B during last week.

Despite the slight decrease, our RoC remains bullish. This suggest a fundamental driven uptrend in the upcoming weeks/months.

Bitcoin surged last week from 59k to 67k, after we posted our Liquidity Oscillator going positive.