It is hardly a secret, that one of the biggest threats facing risk assets in 2018 and onward, is the great central bank QE/balance sheet unwind, something we have discussed extensively in the past year, and as a recent example, in "
This Is Most Worrying": In One Year, Central Bank Liquidity Will Collapse From $2 Trillion To Zero," in which Deutsche Bank said that "the most likely causes of a shift to ‘flight mode’ and a rise in volatility" is that by the end of [2018], the combined expansion of all the major Central Bank balance sheets will have collapsed from a 12 month growth rate of $2 trillion per annum to zero."
This is shown in the following chart depicting the total shrinkage in central bank asset growth:
And yet, despite the Fed's methodical, if slow balance sheet shrinkage and the ECB's recent QE tapering from €60 to €30BN per month, followed by the BOJ's latest "
stealth tapering" last week, stocks have started off the new year with a panicked melt-up euphoria the likes of which haven't been seen in decades as the flurry of recent "serious" headlines suggests....[
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