As we are less than 24 hours away from the first Fed meeting of 2024, odds of rate cuts are pulling back
Odds of a rate cut this week are down to 2% and odds of a rate cut in March are down to ~40%. This is the lowest probability of a March rate cut since November 2023. Still, futures are pricing-in a base case of 6 rate cuts for a total of 150 bps in 2024. - All eyes will be on Fed guidance on June 30zh Source: The Kobeissi Letter
US Bankruptcy filings keep moving higher
This sounds like a logical consequence of 2 years of aggressive FED tightening but still something to keep an eye on Source: Win Smart, CFA
🇯🇵 Hedge Funds, Asset Managers Take Opposite Yen Bets Amid BOJ Talk - Bloomberg, C.Barraud
Hedge funds and asset managers were split on their yen views as the Bank of Japan laid the ground for an end to its negative-rate policy. Leveraged funds cut net yen shorts to the lowest level since February 2023 in the seven days ended Jan. 23 when BOJ announced its last policy decision, according to a report from the Commodity Futures Trading Commission. In contrast, asset managers, such as pension funds and insurance companies, boosted net shorts by the most since May when the investors switched to shorts from longs.
The Fed did almost no QT in the last 3 weeks
As highlighted by Tavi Costa, this was the smallest change in their balance sheet since the regional bank crisis in March 2023. Source: Bloomberg, Crescat Capital
Interesting FT article highlighting the improvement of global liquidity (contributor -> Cross Border Capital as contributor)
Flows of global liquidity accelerated higher into early 2024, expanding by 9 per cent at an annual rate from September, led by strong increases in Japan and China In 2024, we expect greater liquidity support from central banks as more policymakers turn towards monetary policy easing. Aside from the Fed, the People’s Bank of China is the obvious central bank to watch as it already contributed almost one-fifth of the total increase in global liquidity last year.
The market is at the same level as 1960 when adjusted for M2 money supply
Source: Game of Trades
The US Money Supply decreased by 2% in 2023, the largest annual decline on record with data going back to 1959
This was the second straight annual decline which followed the record 40% expansion in the money supply in 2020-21. Source: Charlie Bilello
The key role played by central banks liquidity, as highlighted by Matt King
Many seem surprised by the new record highs in the S&P, given an ambiguous outlook and a backdrop of supposedly tight rates. They are a lot less surprising when you consider that central banks' balance sheet policy has been remarkably easy. Over the past 14 months, the Fed alone has added nearly $500bn, and global central banks over $1.25tn, in liquidity. Source: BofA
