Macro analyst Raoul Pal predicts a massive influx of liquidity into global financial markets, which could drive up risk assets such as cryptocurrency.
Catalysts for Liquidity Increase
Pal identifies several factors contributing to the expected liquidity surge:
- Treasury General Account drawdown
- End of quantitative tightening by the Federal Reserve
- Drainage of reverse repo operations
- Congressional approval for Fannie Mae to offer equity release mortgages
- Potential tax or fiscal stimulus
- Japanese currency intervention
- Liquidity injections by other countries
- Implementation of Basel IV banking regulations
- Weakness in commercial real estate
Implications for Risk Assets
Pal believes that this liquidity increase will create a “banana zone” for risk assets, a period of rapid rallies. He notes that risk assets tend to perform well in environments with ample liquidity.
Disclaimer
The opinions expressed in this article are not investment advice. Investors should conduct their own research before making any high-risk investments.
