An aggressive global easing is here without a global slowdown or any stress in asset markets. Such Over Easy policy has been pursued in the past by individual countries, but has never been run at a global scale. Thread.
Nearly every central bank in the world is in easing mode, nearly on par with the GFC period in number.
Money supply is expanding again. h/t @TaviCosta
And broader measures of liquidity like this from @crossbordercap are also picking up.
Nearly every central bank is expected to cut aggressively ahead, with some form of the following chart showing pricing in of many cuts ahead.
Central bankers are also getting more aggressive with their language. @Lagarde yesterday bending over backwards to disregard inflation risks and reinforce easing ahead. Today's data reinforcing the view.
And even when it sounds like central banks are not "in a hurry" to cut, markets are still pushing hard for easier policy. Here 40/60 for a 50bps cut in the next meeting, despite JP's words yesterday.
And China of course taking steps to support their economy through substantial monetary easing. Though it more likely needs to be done, it certainly is moving clearly in the direction of easier / more stimulative policy.
Even the few places where aggressive easing isn't taking place are expected to stay roughly flat, not tighten substantially. Like Japan and AUS.
Such a massive global easing is unusual given the pretty strong underlying global dynamics. Global stocks are pushing all time highs.
Global credit spreads are right near all-time lows.
And global growth is holding up pretty well. While its down from the post-covid rebound, it's been running pretty stable for the last 2yrs+ at just over 3% real.
Past periods of global easings have typically occurred *in response* to deterioration of financial or economic conditions, serving as an effort to offset weakening. And typically it takes awhile for the easing the flow through to reverse conditions.
Easing when asset prices are at highs, spreads are at lows, and economic conditions are in pretty good shape is very different than those past easing cycles. While it may not be apparent at first, over time it is likely to create a class "Over Easy" environment globally.
Such an environment of easy money favors "real" assets like gold, stocks and commodities, helps keep spreads tight, and is detrimental to duration as the economics of borrowing to invest in assets and the real economy look increasingly compelling.
It is likely confusing to many because things like valuations and price levels may be at highs, but the pressures are for them to get more extreme. Quite a bit different than the easing that comes against low valuations early in the cycle (where assets look like a good deal).
The result is price action that looks a lot like early cycle, despite the fact that the economy is late cycle, risk premia are compressed and prices are at highs. This type of environment is particularly good for "catch up" trades for previously underweight assets as well.
These kind of "Over Easy" periods have been common in emerging markets through history, but rarely carried out on a global scale. In those economies, policy typically only shifts tighter once inflation or the exchange rate becomes an issue.
On a global scale it is going to be quite a lag before the perking up of inflation pressures are finally in the reported data. And with everyone easing, it is masking the global currency devaluation relative to gold, but no central bank thinks of hard money as a benchmark.
This process is just getting started, and it is going to take time some time for all the cuts to happen and all flow through to the global economy. As it happens, expect to see unusual early cycle outcomes happening in a late-cycle global economy for some time.