Global Liquidity Forecasts

August: Towards an October market-mayhem?

Just on Wednesday, we noted in our July World Economic Outlook that “the dip we anticipated to appear in stock markets during July failed to materialize”. Just one day later the DJIA fell by close to 500 points (1.21%) and is continuing the same trajectory today (at the time of writing). Moreover, on Friday morning Nikkei crashed by 5.8%, or 2200 points, its second worst daily fall in history, surpassed only by the ‘Black Monday’ (October 19th, 1987). Bad news on the U.S. economy and Japanese yen gaining considerably contributed to the sell-off. Yet, on the background, withdrawing liquidity, most likely, played an important role (we know this only later).

In this entry, we update our liquidity forecasts. They indicate a tumultuous period for October.

Forecasts of market liquidity