Christmas, New Year and even a new decade are all approaching fast and so to close the year of Tatton Weeklies with this final 2019 edition, we will reflect on the changes of the last 12 months and indeed the past decade, and what that might tell us about likely developments over the coming year and decade.
The fourth quarter of 2019 has felt like a mirror-image of 4Q 2018. Liquidity was tight then, and is abundant now, particularly since the US central bankers restarted their purchases of US government bonds. Previous rounds of quantitative easing (QE) were aimed at bringing down longer term lending rates to stimulate the economy. But this time the Federal Reserve is buying assets in order to ease strains in New York’s short-term interbank lending markets. This may be an important point of principle for economists. However, it appears to make no difference to stock markets: they have rallied over the quarter as any fears of credit market stresses have receded further, even though the causes of such stress from a slowing economy have arguably increased.
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