Are we finally at peak sentiment?
Our monthly update from CrossBorder on global liquidity conditions has got clear signs of the change from QE to QT (Quantitative Tightening) happening. Overall liquidity is a bit below average at 43.8, but there is clearer evidence that major Central Banks are quantitatively tightening, that capital flows have reached a high, and that overall Risk Appetite is also at a peak, consistent with this. Markets thrive on strong liquidity and rising risk appetite among investors, but both are becoming scarcer and more localised. Effectively we are at, or just over, Peak Sentiment. This says nothing about the pace of its future decline but does warn that investment returns are coming under downward pressure. Emerging Markets and Europe look strongest and, indeed, Emerging Market risk appetite is on a big upswing everywhere. It may not be time to sell quite yet but we think that's where investors should concentrate their firepower.
CrossBorder's full article is available for purchase here.