German Stocks Vulnerable

The DAX index is near all-time highs, and German stocks are rallying in line with other European markets. While the economic news has been good, our leading indicators for Germany are much less rosy than we would expect given stock prices. There is a big divergence,...

Stretched Sentiment Leaves EM Vulnerable

Liquidity conditions have deteriorated meaningfully for EM equities. The left chart below shows that the steep drop in G7 Excess Liquidity points to a risk of much lower EM equity prices in about 3-4 months’ time. This materially worse backdrop for EM equities is...

Chinese Excess Liquidity Rolling Over

Chinese excess liquidity does a good job of leading asset prices as well as China-related commodities. We define excess liquidity as M1 money growth minus Inflation minus economic growth. This captures how much excess money there is beyond what the real economy can...

Financial Conditions Ease, but Growth to Remain Weak

Two of the best global leading indicators tools we have are VP’s Business Cycle Financing Index (BCFI) – which tracks financial conditions, eg are central banks easing or hiking, credit spreads widening or tightening (first chart) –  and the global yield...

Money surges in Europe, growth to follow

If you ignore the ongoing Greek sideshow, rarely has European money growth been as accommodative as it is today. Europe has enormous structural problems of too much debt, an inflexible currency and an ageing population, but cyclical factors are very positive. Leading...