Liquidity

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As we wrap up the first half of 2018, Liquidity is still king.  Liquidity describes the degree to which an asset or security can be quickly bought or sold in the market without affecting the asset's price. It also refers to the flow of purchasing power into or out of a market. In recent years the largest source of liquidity entering the market has been central bank asset purchases (aka Quantitative Easing or QE). These asset purchases started as a reaction to Great Recession of 2008-2009. The largest three central banks (the US Federal Reserve, the European Central Bank, and the Bank of Japan) have added liquidity to global markets in relay fashion over the past eleven years as shown here in the following charts from Haver Analytics and Yardeni Research:

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While each of these banks have not individually bought continuously, the combined effect has been continuous purchases of nearly $12 Trillion of assets bought with money created  "out of thin air" for that purpose.

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Rather unsurprisingly, these continuous asset purchases, and the confidence such liquidity has inspired among investors, have driven prices of stocks and bonds upwards for years...

(Additional investment specific commentary follows for client subscribers)

References:

http://stockcharts.com
https://www.yardeni.com/pub/peacockfedecbassets.pdf
https://abcnews.go.com/Politics/wireStory/trump-backs-off-imposing-china-investment-limits-56197065
https://www.yardeni.com/pub/peacockfedecbassets.pdf
https://www.investopedia.com/terms/l/liquidity.asp

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