Global Liquidity Prospects For 2024: Part 2

Asset Allocation Thoughts

Continued From Part 1…

US Fed Inching Towards Ease

We have argued over the past 12-months that the US monetary authority (this broad domain includes the Treasury and the Fed) have operated a ‘stealth QE’ by gradually lifting liquidity levels in US money markets. Consider the stark contrast in the chart below between the size of the Fed balance sheet; the size of Fed liquidity operations and the original projections of both when the QT policy was first announced is stark. Not only is Fed liquidity itself trending higher, but the current level of liquidity in US money markets is around US$1 trillion more than originally planned.

US Federal Reserve Balance Sheet and Net Liquidity Injections, 2018-2023