Matt King Sees a $1 Trillion Liquidity Drain Heading for Markets

Odd Lots

Bloomberg

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4.4 • 1.6K Ratings

🗓️ 30 March 2023

⏱️ 38 minutes

🔗️ Recording | iTunes | RSS

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Summary

One of the big mysteries in markets right now is why risk assets rallied so strongly into the new year even as policymakers were adamant that they would continue to go hard on inflation by raising rates. Sure, there have been some recent signs of a "soft" or even "no landing" scenario, but a lot of the price action seemed pretty dramatic, with investors dashing back to meme and tech stocks that were beaten down last year. Matt King, Citigroup strategist and Odd Lots favorite, has one explanation for the recent "dash for trash." He argues that even though many central banks around the world have announced that they're winding down several years of extraordinarily loose monetary policies, they've actually been adding liquidity to the financial system in recent months — almost $1 trillion of it. Now he says that extra liquidity is going away and it isn't at all clear if private businesses and investment will fill the gap.

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0:00.0	This is Paul Swinney, here to tell you about another podcast you should be listening to.
0:03.8	The tape.
0:04.8	Join us every weekday as we bring you detailed analysis of the day's wall street action
0:08.5	from Blueberg Intelligence and Blueberg Opinion, a conversation with influential newsmakers.
0:12.9	There's absolutely nothing wrong with having something cash on the sideline you're leaning
0:16.4	pretty hard toward equities.
0:18.7	Because of all the dislocations, there's always relative value trades that you could be doing.
0:23.1	Subscribe to the tape today on Apple, Spotify, Bloomberg.com or wherever you get your podcasts.
0:30.0	Hello, Odd Lods listeners.
0:41.4	We wanted to take a quick moment to let you know that this episode of Odd Lods is a little
0:46.5	bit unique.
0:47.9	First of all, we recorded it on March 2nd, so that's before some of this recent turmoil
0:53.5	struck.
0:54.5	Nonetheless, it remains really relevant because it's a discussion in part about how much
0:59.4	extra liquidity is in the system and how much will be have to take it out in order to
1:04.3	get inflation back to target.
1:06.9	Now our guest, Matt King, brought a lot of charts to show us and those charts are reference
1:11.4	throughout the conversation.
1:13.0	So if you want to see those charts and follow along with them as you listen, you can find
1:16.9	a companion article for the episode at bloomberg.com slash odd lods.
1:21.7	Or you can watch a full video version of this episode at youtube.com slash bloomberg
1:27.3	podcasts.
	...

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