14th June 2019
After a tumultuous Q 4 18 2019 began with great optimism at the prospect of yet another central bank reflation. Indeed the market grew palpably giddy when January’s aggregate social financing numbers were released in China. If this was a sign of things to come then the global economy was back in business. Such optimism, we felt (and in fact wrote at the time Global Reflation Fades, March 2019) was misplaced.
Fast forward five months and we have yet to significantly change our view. Without question some level of intervention was always likely a stabilisation in monetary conditions after a period of US rate hikes and QT. However the kind of show stopping stimulus, to which the financial markets had become so acutely accustomed is going to be a difficult trick for the central banks to pull off this time. There is real concern today that we are pushing the capacity central banks have in stimulating real economic improvements.
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