现金流与流动性：财政调整和财政状况

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1、F&LLibraryFiscaladjustments&financialconditionsGlobalMarketsStrategy10June2019BelowareexcerptsofpastissuesofFlows&Liquidityonthetopicof:Fiscaladjustments&financialconditions.Theexcerptscanbefoundinreversechronologicalorder,withthemostrecentupdatebelow.Theexcerp

2、tsarenotupdatedandareaccurateonlyasofthedateindicated.Generally,wedonotemailoutthisdocument,butmaintainitonJ.P.MorganMarketsasareferencetool.Whathappensintothefirstcut?(extractfromFlows&Liquidity,07Jun19)·Ratemarketssawaseachangeoverthepasttwoweekswiththeinversi

3、onatthefrontendbecomingthenormratherthantheexception.·Themagnitudeofratecutsexpectedoverthenext1-2yearsrangesfromaround10bpfortheECBandSNBto15bpfortheBoEandBoJtoaround50bpofratecutsforBoC,RBAandRBNZand100bpfortheFed.·Thisexpectationofuniversaleasingisboostinggov

4、ernmentbondmarkets.Butdoequitymarketsdowellwhencentralbankscutrates?·Theanswerisitdependsonthereasoncentralbanksarecuttingrates.·HistoryshowsthatwhentheFedcutsratesinaweakeninggrowthenvironmenttheequitymarkettendstoperformpoorly.·WhentheFedcutsratestoprovideinsu

5、ranceevenasthecurrentgrowthbackdropremainsresilient,likein1995or1998,theequitymarkettendstoperformstrongly.·Andthisisthechallengeforequitymarketsgoingforward.ThethesisthatequitymarketsappeartobepricinginatthemomentfollowingFedofficials'commentsearlierthisweek,is

6、ofapre-emptiveFedthatissettoprovideinsurancesimilartothe1995and1998episodes.·If,ontheotherhand,theFedendsupbeingratherreactive,equitiescouldfollowaweaktrajectorysimilartomoretypicalpreviousFedeasingcyclesratherthanthestrongtrajectoryseenduring1995or1998.·History

7、showsthatUSTyieldscontinuedtorallyandtheUSTcurvecontinuedtosteepenforupto6monthsonaverageafterthefirstFedratecut.Creditspreadswidenedonaverageduringthefirst6monthsfollowingthefirstFedratecut.Thedollarwasonaverageonanupwardtrajectoryforupto3monthsfollowingthefirs

8、tFedratecut.·InvestorssoughttoprotectagainstItalianpoliticalriskviaBTPshortsandreducedforeignownershipofItalianassetsoverthepastyear.GlobalMarketsStrategyNikolaosPan