Edition 1.0: Liquidity, Bonds & Equities
Welcome to all new and existing subscribers to the first post in our Macroscope series. As announced a few weeks ago, I will add this valuable new publication to the existing mix of timely updates, thought pieces and educational primers.
Traditionally, a macroscope is imagined as an instrument that helps us see the “big picture” to understand systems too vast for the human eye to grasp in detail. By connecting the dots across a broad spectrum of economic and financial data, Macroscope’s goal will be synthesising global economic trends and market dynamics into a no-nonsense and actionable format.
In essence, we want to explore and test our thesis on what we believe drives returns and connects the pillars of our complex financial system.
This output will provide us with tested and actionable strategies, which we will use alongside the behavioural/sentiment-driven patterns we cover through the models.
For currently paying subscribers, the value of your subscription is about to go up, but don’t worry, as your locked-in price will remain the same. If you are considering subscribing, I would encourage you to do so in due course, as my pricing will change with me directing more time and resources into powering the output of the engine room.
Edition 1.0 will explore the notion of liquidity. We all have our preconceived ideas on how it influences financial markets. Yet, aside from plotting central bank balance sheets versus various asset performances (see below), I haven’t seen much evidence of looking into strategies that directly benefit from such shifts in this omnipresent force.
We will start from basics and then provide a time-tested strategy, which allocates into equities (S&P 500 in this case) when certain conditions are met. It’s great to be a long-term investor, but as in any compounding strategy, it makes a huge difference if you can avoid large drawdowns. Exploring the liquidity cycle and its impact on equity performance is what we will be covering in this post.
Let’s begin the Macroscope journey.