Don't blame turmoil on Central Banks

13.02.2018 / 09:37

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Reality check: the recent correction in stocks wasn't related to any withdrawal of liquidity by global central bankers. Far from it, in fact. January 2018 saw the third-largest monthly increase ever in the combined balance sheets of the four largest central banks -- the ECB, PBOC, BOJ and Fed. Amazingly, that's despite the fact that we don't have PBOC data for the month yet (and we know from Monday's loan data that they are still pumping liquidity).

The only two months with larger increases were September 2008 and December 2008. Yep, right back at the height of the financial crisis. And it's a safe bet last month's increase will exceed that of December 2008 once the PBOC data is factored in.

It's fair to highlight that currency valuations (a weakening dollar) significantly impact the reading, but the directional trend is still clear when it comes to global liquidity. The Fed's balance sheet may have peaked three years ago, but the ECB's has more than doubled since then!

Source: Bloomberg Pro Terminal

Jr Trader Alexander Kumanov

Varchev Traders

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Don't blame turmoil on Central Banks

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