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Steno Signals #104 – Get ready for a WAVE of liquidity in July!

While the rate of change is turning bearish on growth- and inflation, we may (temporarily) end up in a goldilocks scenario in July. Bonds tend to perform alongside equities in such a scenario. Buy risk and head for the summer cottage?
2024-06-16

Happy Sunday from Copenhagen!

Risk asset investing is typically seen as a winter-sport for good reasons, but July is often up there among the best return months. It’s as if July heard winter bragging about its stock market prowess and decided to show up in flip-flops, a Hawaiian shirt, and a cocktail in hand, just to prove that even in the heat, it can keep up with the icy competition.

This year is unlikely to be an exception as we will see improving liquidity trends into July, while the bond market seasonality is typically also a lot more favorable due to more benign issuance trends (especially in Europe).

With USD liquidity likely going to improve, while Commodities are being sold-off, we may be in for a Goldilocks July, which is probably not how the market consensus views the current risk picture.

Our liquidity forecasts have been SMACK dab correct over the past months, and we see a large increase in liquidity through July. Find the details below.

Chart 1: Liquidity forecast in 2024

While the rate of change is turning bearish on growth- and inflation, we may (temporarily) end up in a goldilocks scenario in July. Bonds tend to perform alongside equities in such a scenario. Buy risk and head for the summer cottage?

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