Earlier this year, our Macro research team highlighted that shaky investor faith in the global central banking #BeliefSystem was breaking down. That call has been working out well. On a related note, take a couple of seconds to absorb the chart below. It highlights the astronomical, multi-trillion dollar, yen, euro rise in central bank balance sheets.
Pretty unbelievable right? Question. With trillions already on central bank balance sheets around the world... what more can they possibly do?
Not much.
We're already beginning to see the cracks in the #BeliefSystem edifice. Nowhere is this more apparent right now than in Japan. Despite the BOJ's best efforts to devalue the currency and prop up equity markets, the USDJPY is down -14.5% and Nikkei has tumbled -18% year-to-date. Meanwhile in Europe, the EuroStoxx 500 is down -12.4% and EURUSD is up +2.2%.
Why Is the #beliefSystem Breaking down?
For starters, global #GrowthSlowing continues to confound the plans of the world's omnipotent central bankers. These un-elected bureaucrats have failed to arrest economic gravity since the data started rolling over.
Slow growth evidence is everywhere. Setting aside the obvious slowdown in economic data (click here and here for more), check out sovereign bond yields for select countries. The charts below show yield curves for these sovereign bonds today (green line) versus where they were last year (yellow line). (The red line shows 0%. Notice how much closer all of these yields are to the zero bound.)
To be clear, central bankers have manipulated these yield curves using unconventional methods like negative interest rate policies and QE. But that's just the proposed inoculation for the broader disease which is global #GrowthSlowing.
In short, pancaking yield curves = #GrowthSlowing in action
(And #TheCycle is just getting started)