Matt King Is Back With A Dire Warning: “A Significant Un-balancing Is Coming”
by Tyler Durden
ZeroHedge.com
Jun 16, 2017
Earlier this week we discussed a chart from Citi’s Hanz Lorenzen, which we said may be the “scariest chart for central banks” and showed the projected collapse in central bank “impulse” in coming years as a result of balance sheet contraction, and which – if history is any indication – would drag down not only future inflation but also risk assets. As Citi put it “the principal transmission channel to the real economy has been… lifting asset prices” to which our response was that this has required continuous CB balance sheet growth, and with the Fed, ECB and BOJ all poised to “renormalize” over the next year, the global monetary impulse is set to turn negative in the coming year.
Today, after a nearly three month absence, our favorite market strategist, Citi’s Matt King is back with a note which confirms our suspicions.
In “Markets un-balanced” he warns that “the Fed’s planned balance-sheet reduction, coupled with ECB tapering, seems likely to destabilize markets sufficiently that we think they will be unable to complete it.” And yet there is a paradox: since by definition central-bbanker intervention has broken the market, and thus its discounting abilities, King warns that the repricing may not take place until it is too late to step back: “our models suggest markets are unlikely to react until the reductions in purchases are actually implemented. This is in stark contrast to the widespread presumption of immediate and full discounting.”
The Rest…HERE
