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  • Hello, and welcome back to the five charts of Christmas.

  • Now, have we seen peak liquidity?

  • This shows you the amount of liquidity injected by the big four central banks this year

  • and their plans for the coming years.

  • And as you can see, if they hold by their announced plans,

  • 2018 is going to be the year in which liquidity actually goes into reverse,

  • in which central bank balance sheets actually, on-net, begin to decline.

  • Now if that happens it's a good sign,

  • in that that means that the economy will be continuing to grow as everyone hopes,

  • but it will be far harder for asset prices to continue to rally.

  • If, however, the central banks lose their nerve, and we continue to see liquidity,

  • we haven't seen peak liquidity,

  • then that would be much more positive for asset prices.

  • But the bad news would be that, presumably,

  • economic growth isn't going quite as well as hoped.

  • Either way, this is perhaps the most important question for markets in 2018:

  • have we really seen peak liquidity?

Hello, and welcome back to the five charts of Christmas.

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A2 US FinancialTimes liquidity central central bank peak decline

Central bank balance sheets may decline

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    林恩立 posted on 2018/01/03
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