Hope you had a great weekend! Here’s this week’s sneak peek into my thoughts on liquidity trends and how they influence my approach to risk-taking.

Watching the alt-season unfold from an incredibly wet and windy Copenhagen this weekend has been quite bizarre. The weather outside certainly doesn’t bring out my animal spirits, but there’s a certain smell of 2021 in the air in financial markets—especially if central banks decide to print more into this scenario.

We’ve had some pretty nasty inflation data from the US and the UK in recent months. Coupled with the ongoing pressure on the EUR due to rising local energy prices, even Eurozone inflation remains a relevant topic. With few signs of inflation returning to 2%, central banks seem eager to find excuses to continue easing (as they appear inclined to do). The weak employment intentions reflected across all PMIs last week might give them exactly that.

We are now at a stage where the Fed (and, to some extent, the BoE) needs weak data to justify easing policy rates and balance sheets heading into 2025. However, the cycle has so far proven too strong for such a move since the jumbo cut in September. Thankfully (yes, I said it), we are starting to see signs of growth rolling over in our nowcasts, which is probably exactly what you’d hope for if you’re max long on risk.

Chart 1: Growth is slowing a bit in the US again