Key Macro Charts: How to Allocate Assets Based on Liquidity? (2024/9/26)
The latest energy survey from the Dallas Fed shows that the business activity index has contracted for the first time since 2020, reflecting the impact of falling oil prices on U.S. producers. Oil and gas companies expect WTI oil prices to fluctuate around current levels. Bank of America points out that the price of gold is 15% above the 200-day moving average, historical data shows that returns are usually flat at this point. The Chinese stock market saw the largest single-day net buying since March 2021. Analysts predict that global liquidity will continue to rise, historically this kind of breakthrough is usually positive for risk assets
Oil Market Observation
The Dallas Fed has released its latest energy survey. The first thing to note is that the business activity index has contracted for the first time since 2020! This not only reflects a decrease in drilling activity, but more importantly, it indicates that the impact of falling oil prices on U.S. producers' activities is finally beginning to show.
The survey shows that oil and gas companies expect WTI oil prices to hover around current levels, or to slightly increase by the end of the year. However, expectations for a significant surge in oil prices in the short term are no longer present.
Gold vs. 200-Day Moving Average
Bank of America: Currently, the price of gold is 15% above the 200-day moving average (exceeding the normal level by 2 standard deviations). Historical data shows that after reaching such extreme levels, returns in the following 1-6 months tend to be flat.
Hedge Funds vs. China
Bloomberg: On Tuesday, the Chinese stock market saw its largest single-day net buying since March 2021, also the second largest net buying volume in the past 10 years.
Global Liquidity
Analysts: We have been expecting global M2 to rise, and now it has happened. We are also closely monitoring the GMI weekly global liquidity index, focusing on the net liquidity of central bank balance sheets, which is also on the rise.
Both public and private liquidity have broken through, driving the breakthrough of the GMI total liquidity index. If our assumptions hold true, liquidity will continue to rise.
Historically, such breakthroughs are often good news for risk assets. The correlation between asset prices such as gold and U.S. stocks and liquidity can be quantified. If you want to strategically position yourself in advance, the answer can be found in the following chart...
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