{"id":1442072,"date":"2023-12-04T14:45:00","date_gmt":"2023-12-04T19:45:00","guid":{"rendered":"https:\/\/bugaluu.com\/news\/?p=1442072"},"modified":"2023-12-04T14:45:00","modified_gmt":"2023-12-04T19:45:00","slug":"asset-rallies-at-risk-as-liquidity-drop-meets-labor-data-deluge","status":"publish","type":"post","link":"https:\/\/bugaluu.com\/news\/asset-rallies-at-risk-as-liquidity-drop-meets-labor-data-deluge\/1442072\/","title":{"rendered":"Asset Rallies At Risk As Liquidity Drop Meets Labor Data Deluge"},"content":{"rendered":"

Asset Rallies At Risk As Liquidity Drop Meets Labor Data Deluge<\/span><\/p>\n

\n

Authored by Simon White, Bloomberg macro strategist,<\/em><\/p>\n

There are fertile conditions for volatile markets this week <\/strong>as a raft of labor data is released at the same time as liquidity sees a sizable drop versus last month\u2019s buoyant conditions.\u00a0With positioning in bonds now very long, yields are at risk of rising, triggering a selloff in stocks.<\/strong><\/p>\n

Focus returns to the US labor market this week as JOLTS, ADP, Challenger layoffs, ISM services employment and payrolls are released. <\/strong><\/p>\n

The jobs market is slowing but the question remains: will it deteriorate fast enough to prompt the Federal Reserve to act even sooner than rates markets are expecting?<\/p>\n

This comes at the same time as a non-negligible drop in liquidity and skewed positioning in bonds. The JPMorgan Treasury Survey of active clients is registering an all-time high in net longs.<\/strong><\/p>\n

<\/a><\/p>\n

Liquidity was\u00a0very supportive\u00a0for assets last month, with Fed reserves rising almost $200 billion. <\/strong><\/p>\n

The combination of money market funds drawing down on the reverse repo facility and the Treasury drawing down on its account at the Fed (the TGA) led to a jump in reserves despite ongoing quantitative tightening.<\/p>\n

Just one thing matters: in November, central banks added $350BN in liquidity, the third largest increase since March pic.twitter.com\/xjThXLOQam<\/a><\/p>\n

\u2014 zerohedge (@zerohedge) December 4, 2023<\/a><\/p>\n

But this last week has not been so favorable. <\/strong>The TGA has risen by ~$60 billion, absorbing the same amount of reserves, with the RRP \u2013 only falling marginally \u2013 therefore not mitigating the TGA\u2019s rise.<\/p>\n

<\/a><\/p>\n

In the labor market, indicators with a longer lead (6-12 months) expect payrolls\u2019 annual growth to continue to fall. However, shorter-term leading indicators, e.g. unemployment claims, have recently inflected lower, which would not be consistent with a jobs market that is about to worsen at an accelerating rate.<\/strong><\/p>\n

This agrees with what has happened in previous cycles.<\/strong> The median and mean unemployment rate around the end of Fed tightening cycles does not accelerate higher until about a year after the central bank\u2019s last rate hike.<\/p>\n

<\/a><\/p>\n

Nonetheless, monthly data is volatile (especially payrolls), and there is every chance of a negative surprise. With liquidity less supportive versus last month, that opens up the likelihood of more volatile markets.<\/strong><\/p>\n

Further, if long positioning in bonds is as extreme as the JPM survey indicates, even weak data could trigger profit taking and thus higher yields, prompting overbought stocks to sell off.<\/p>\n<\/div>\n

Tyler Durden<\/a><\/span>
\nMon, 12\/04\/2023 – 09:45<\/span><\/p>\n

\u200bhttps:\/\/www.zerohedge.com\/markets\/asset-rallies-risk-liquidity-drop-meets-labor-data-deluge<\/a>\u00a0<\/p>\n

\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"

Asset Rallies At Risk As Liquidity Drop Meets Labor Data Deluge Authored by Simon White, Bloomberg macro strategist, There are fertile conditions for volatile markets…<\/p>\n","protected":false},"author":0,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1442072","post","type-post","status-publish","format-standard","hentry","category-news","wpcat-1-id"],"_links":{"self":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1442072","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/comments?post=1442072"}],"version-history":[{"count":0,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1442072\/revisions"}],"wp:attachment":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/media?parent=1442072"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/categories?post=1442072"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/tags?post=1442072"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}