Global View Quantitative Squeezing - Prospects for Global Liquidity in 2018 January 2018
'Quantitative Squeezing': Prospects for Global Liquidity in 2018Nervy investors are looking in the wrong place. It is reversing cross-border flows and not reversing Central Bank QE that poses the major risk for 2018. Overall, this year will see positive gains in both Global Liquidity and Central Bank money, but at much reduced rates when compared to 2017. China, which is entering the New Year with faster liquidity growth and more policy impetus that many recognise, is critical to prospects. On paper, we expect less US dollar weakness this year than last, but the dollar could be the key test for investors. A more rapid exit of US$3 trillion of foreign flows from the US, is easily a bigger threat that the slated more gradual withdrawal of US$1-2 trillion of QE, and paralleling events in 1987, it could trigger a second-half sell-off. Whatever, the alternative currency to watch is the Chinese Yuan, which has the potential to grab a large share of the US dollar reserve currency market. In this light, gold may also be a winner, despite reverse QE policies.
CrossBorder Capital Ltd (CrossBorder) is a London based, FCA registered, independent investment firm founded in 1996. It is owned by its partners and has no affiliations with banks, stockbrokers or other financial institutions.
CrossBorder's core competence is the measurement and analysis of global liquidity flows. Liquidity is a source of funds, in contrast to money which is a use of funds. It is defined as the flow of cash plus credit, or more explicitly as savings plus the change in base money plus the change in bank credit. Liquidity is therefore a more comprehensive measurement of fund flows than the monetary aggregates used traditionally. Liquidity research is applied to determining the outlook for a range of asset classes including equities, fixed income, currencies and hedge fund styles over varying time horizons.
Central to this analysis is the monthly collection and analysis of balance sheet data from over seventy of the world's central banks to quantify the level and direction of liquidity in each country. This data is publicly available, aggregate as opposed to sample, and rarely significantly revised. It is also little used by investors, and CrossBorder's prime utility is bringing this set of data to investors in a timely and user-friendly way.
CrossBorder's insights rest on two philosophical assertions: first, there is a regular cycle of liquidity, and asset class price movements tend to move sequentially over the cycle. By measuring where we are on it, we can significantly reduce 'fat tail' outcomes in our predictions for asset price movements. Secondly, weightings of asset classes held by investors in aggregate tend to revert to the long term mean. By measuring the variance from this mean, we can understand whether a particular trade is 'crowded' or the reverse.
CrossBorder offers these insights both as the Liquidity Research research service, and in the form of systematically allocated in-house funds. Clients of the Liquidity Research service include leading banks, fund managers (both traditional and hedge) and insurance companies located worldwide. CrossBorder additionally manages and advises on tactical asset allocation products for third parties.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.