The CrossBorder Capital Blog

A Coming Crash: The Law of Conservation of Financial Volatility?   Equity market volatility (VIX) has picked up but still pales relative to both fixed income and forex volatility. This is not that unusual when volatility is rising because it is sequential and typically migrates from forex to bonds to stocks. Equity volatility is both a derivative of volatility in these asset markets plus an extra economic volatility factor that come from the business cycle. We expect the VIX to test the 50 index. It will not fall before bond and forex volatility themselves subside.       See our latest published research , Global View: A Coming Crash: The Law of Conservation of Financial Volatility? – October 2022    

The Most Important Number In the World Is Crashing Lower…   Collapsing Global Liquidity is severing impairing market liquidity. Well-publicised turbulence in the UK gilt market is a warning to others of wider liquidity problems. US Treasury term premia already signal trouble ahead. Few seem to comment on the fact that they are trading near all-time lows. None of the reasons are bullish for the World economy or equity markets. The only hope is turbulence triggers a Central Bank policy pivot. Could bad news, be 'good'?     See our latest published research , Global View: The Most Important Number In the World Is Crashing Lower… – October 2022    

China and Emerging Market Liquidity: Straws In The Gale   ·                 EM may fare better than in past crises, but the normal positive performance triggers – Chinese stimulus and a weaker US dollar – are still lacking   ·                 China is suffering rising capital outflows. If these outflows continue, they will surely constrain the PBoC in loosening monetary conditions?         See our latest published research, China and Emerging Markets Latest GLI™ – October 2022  

Yield Curve Control (YCC) Is Coming   There is muddled talk about a potential ‘policy’ pivot. The US Fed may decide to soon halt rate hikes, but the odds of another sharp rate-cutting cycle in Fed Funds seems more remote, as does a renewed over-reliance on QE. Yet, policy-makers need to avoid the potential ‘doom-loop’ between debt accumulation and rising rates, as long-term fiscal pressure loom. Japan ‘successfully’ employs yield curve control and the ECB and Bank of England have recently been seduced. Past FOMC discussions show a remarkable empathy from key US officials. Watch this space?     See our latest published research , Global View: Yield Curve Control (YCC) Is Coming – October 2022    

  Global Liquidity Latest: Countdown To The Pivot   ·                 Prevailing low liquidity conditions warn that investors still hold too many risk assets relative to fast deteriorating economic prospects   ·                 Experts praise the Bank of Japan’s YCC success. Key US officials, namely Fed Vice Chair Brainard and Treasury Secretary Yellen have been past advocates. YCC is a subtle way of re-starting QE policies, but, from Japan’s experience, with less upside risks to balance sheet size       See our latest published research, Global Liquidity Latest – October 2022