Dark Grey Monday

A Too Slow Fed Or A Too Slow Economy?

Its always dangerous to catch a falling knife, so let’s step back and explore the latest sell-off. Asset prices (P) have two moving parts: a liquidity component (L) and a risk exposure component (P/L). These can move independently, but over the long-term they tend to move together. Global Liquidity is seeing a slow, shallow recovery: World investors’ risk exposure has lately been elevated. Major bear markets require a fall in the liquidity trend: this is not yet happening.