There Is No Longer A Market: Citigroup Confirms What Zero Hedge Has Said Since 2009

"Zero Hedge long ago gave up discussing corporate fundamentals due to our long-held tenet that currently the only relevant pieces of financial information are contained in the Fed's H.4.1, H.3 statements... macro economic data now is essentially one big joke."

      - Zero Hedge, January 2010


"we have been saying since day one [...] that when it comes to securities price formation in a centrally-planned regime, it is flow not stock that matters."

     - Zero Hedge, June 2012


Those were the rantings of a "tinfoil hat-wearing", "conspiracy theory-heavy" website, which dared to speak up time and again against widely-accepted economic and financial dogma, which has been the foundation of the Fed's flawed experiment now in its 8th year.

And they were right.

Here is what the global head of credit strategy at Citigroup just said this last Friday.

If there were any lingering doubt, this week’s gyrations demonstrate neatly that it is central bank liquidity, not  fundamentals, driving markets. It is the flow, not the anticipated stock, of QE which counts.


... Central bank policy pronouncements are almost the exclusive driver of market movements at the moment, not fundamentals. Almost all the fixed income investors we meet bought into this idea some time ago – perhaps unsurprising, given the extent to which credit spreads have been diverging from corporate leverage, and seem likely to continue to do so even as leverage rises further (Figure 4). In equities, there are still a few holdouts – but the longer that downward revisions to earnings revisions are met with record highs in markets (Figure 5), the more widely accepted the idea becomes.



... In govies, it has been slightly harder to fathom what is going on – but what remains clear is that it doesn’t have much to do with fundamentals. No wonder the backup in US yields is now fading when it occurs against the most protracted period of negative economic surprises since 2011 (Figure 6). Each successive month’s disappointment on retail sales adds to the likelihood that consumers’ appetite for spending vs saving has fundamentally altered – not just that the benefits from the oil price drop are a little slow to feed through (Figure 7).



... with central bank liquidity the ultimate source of all market movements, investors [are] forced to shun fundamentals and instead hang on the central banks’ every word. At some point, of course, the risk is that the taps are turned off: recent speeches from Yellen, Draghi and others do demonstrate an increasing unease with market behaviour, and an increased emphasis on financial stability and the need for structural reforms. But with the underlying economy still weak, and vulnerable to a sharp sell-off in markets, we fear they will find that mangling, once started, is hard to stop. Particularly when they remain at least partly in denial as to the extent of it.

And since the market no longer exists, and soon, courtesy of double seasonally adjusted "data" economic reporting and analysis will be just as meaningless, soon the Fed, having destroyed trading as we know it not to mention the US middle class, will also succeed in ending financial reporting once and for all.