INSUBCONTINENT EXCLUSIVE:
Nedbank strategists Mehul and Neels write some exciting stuff and like me, they don't confuse fundamentals with liquidity
They wrote in a strategy note:
There is a strong relationship between the change in global dollar liquidity (M1) and the performance of the
global stock market -- a correlation of 76 per cent
expect this relationship to hold
As a result, the risk of further downside potential for stock markets across the world would remain intact.
The EMBI(USD-denominated
USD-denominated debt of EM corporates has grown from $650 billion in 2009 to the current $3.2 trillion and there are significant mismatches
growth, coupled with a tighter Global dollar-Liquidity environment, if EM dollar-corporate spreads continue to widen, it would negate our
view below on EM equities, i.e., that a short-term bounce is possible.
My two centsSo, it comes down to LIQUIDITY and the global money
In fact, it is contracting
The Fed is already in QT mode (forget rate increase, that's only the cost of providing LIQUIDITY)
In a widely expected decision, ECB has also decided to stop its QE
So, how will the existing debt be serviced and how will the new debt be created if private sector and consumer is already leveraged
