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The Lost War

By Sven Henrich

At the time of this writing US markets are up 9 weeks in a row following the December lows making for risk free markets since Jay Powell famously caved on January 4th signaling flexibility on the balance sheet run off. Every tiny dip is bought and bears increasingly look the ones trapped, not bulls.

And the parade of central bank jawboning has been as spectacular as it has been global. Consider what signals have been sent to markets by central banks in just the past few weeks: The US Fed: No more rate hikes, flexible on balance sheet reduction, even open to stopping it altogether and discussing making bond purchases a regular tool, not just an emergency measure. I thought we were done with those? QE4 coming? The ECB: Discussing bringing LTRO (long term financing operation) back which would constitute another liquidity infusion. Didn’t they just end QE six weeks ago? BOJ: Ready to ease more. More? They never stopped and the BOJ famously owns more than 75% of the Japanese ETF market already. And China has added record liquidity infusions in 2019 desperate to provide liquidity to its lending market.

There is no doubt that this renewed global central bank capitulation has succeeded in levitating asset prices from the abyss in December. Greed is back, daily headlines hinting at a successful China trade deal to come and POTUS tweeting “up, up, up” all add up to a buying panic atmosphere.

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https://northmantrader.com/2019/02/19/the-lost-war/

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