BofA: The Liquidity Supernova Is Ending, “This Is The Biggest Risk of All”

Friday, November 3, 2017
By Paul Martin

by Tyler Durden
ZeroHedge.com
Nov 3, 2017

If 2017 has had a surreal feel to it, it is because it has so far been a “perfect encapsulation of 8-year QE-led bull market” according to BofA’s chief investment strategist Michael Hartnett, a “bull market” which has turned financial logic and fundamental economic relationships on their head, and replaced everything with copious money creation as the only marginal price setter.

What are the characteristics of this “bull market”: Hartnett describes them as i) Lower-than-expected rates, ii) higher-than-expected EPS, iii) non-existent inflation = big cyclical returns for asset prices (e.g., EAFE equities & industrial metals); but thematic leadership of “scarce growth” (e.g., tech stocks) & “scarce yield” (high yield and EM debt) which remains the heart of the bull.

What are the characteristics of this “bull market”: Hartnett describes them as i) Lower-than-expected rates, ii) higher-than-expected EPS, iii) non-existent inflation = big cyclical returns for asset prices (e.g., EAFE equities & industrial metals); but thematic leadership of “scarce growth” (e.g., tech stocks) & “scarce yield” (high yield and EM debt) which remains the heart of the bull.

However, if it was central bankers’ intention to boost Main Street at the expense of Wall Street, they failed – as we warned would happen in 2009 – and as everyone now realizes. They did succeed, however, in created the biggest Wall Street boom in history: since the Global Financial Crisis ended in 2009, US equity market cap has risen $17.8tn…far, far outpacing the $2.6tn gain in US real personal income.

The Rest…HERE

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