Often one of the hardest things to fathom in finance is the lack of lateral thinking or common sense from finance professionals.
At the moment the US yield curve vs equity bull markets are puzzling them.
Casting aside the fact the Fed has manuulated yield curves via QE, the overall answer could be as prosaic as this. ~90% of the actual money supply is debt, so as debt grows faster than GDP there is more money available vs the amount of assets.
Therefore average valuations rise, hence higher equity and bond prices. Until the credit cycle stops or there is a dash for cash.
To put it in context from the end of 2008 the US GDP has increased approximately $5Tn, while total US non-financial debt has increased approximately $15Tn, a ratio of 3:1.
So watch out for increasingly narrow bull markets, Fed driven shocks (rates or balance sheet), European banks liquidaing their $600bn Treasury xccy carry trade, or a slowing of the credit cycle.
Finally I am of the view the policy response when there is a recession will be such that the recession is shallow but the outcome wage inflationary; that will be the true end of the 35 asset bubble super cycle we have seen driven by credit.
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