Liquidity Doesn't Get Much Stronger Than This

Authored by Simon White, Bloomberg macro strategist,

Liquidity conditions in the US and globally are going from strength to strength, with excess liquidity of the G10 reaching highs breached only twice before in the last 50 years. Stimulus in China and easing in the US will further bolster an already very positive backdrop for risk assets. But too much liquidity will be a problem if it leads to even more stretched valuations and frothy markets liable to correcting.

It’s been a wild ride through the post-pandemic cycle, and it might be about to get wilder. Excess liquidity — by how much real money growth outperforms economic growth — has again risen to a new recent high. It has only been greater twice over the last half-century, in 2001 and in 2020.