Forward Guidance The Credit Cycle Is Just Getting Started | Andreas Steno Larsen
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Feb 12, 2025 Andreas Steno Larsen, a contributor at Real Vision and CIO of Steno Global Macro Fund, offers a deep dive into the current macroeconomic landscape. He discusses the interplay between liquidity dynamics and credit markets, detailing how private credit growth influences equity markets. The conversation highlights the complexities of inflation and its disparate impact across different sectors. They also explore market trends, particularly the implications of wage growth on performance and the evolving role of major companies in shaping economic recovery.
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Liquidity Drivers
- Liquidity is multifaceted, encompassing public, Federal Reserve, and private sector influences.
- Private sector credit creation has been the primary liquidity driver for the past 18 months, offsetting Fed tightening.
Private Sector Liquidity
- While official liquidity measures appear tight, private sector liquidity remains abundant due to increased credit creation.
- This explains recent market strength despite quantitative tightening.
TGA and Liquidity
- The Treasury General Account (TGA), a liquidity reserve at the Federal Reserve, will be used to fund the government due to the debt ceiling.
- This TGA drawdown will inject liquidity into private banks, but it's a temporary and less efficient measure than QE.