If there is a reason why traders walk into their office every day in a state of zombified daze, no longer able to trade various asset classes based on fundamental data or incremental news flow, there is a simple reason for that: global central bank liquidity injections have never been greater, and as of this moment, have surpassed all previous post-financial crisis central bank intervention.
As Deutsche Bank's Jim Reid points out, "it’s difficult at the moment to fight the central bank in the credit market, especially in Europe and the UK where they are a non price sensitive buyer of the asset class. Even outside of these asset purchase programs it’s fair to say that global policy continues to be remarkably loose. Of the main central banks the Fed has been largely neutralised even if they manage to add a fresh hike in September or December, and the ECB and BoJ have increased and expanded the scope of their QE programs with the BoE recommencing theirs after a nearly four-year break."
Collectively this means central bank liquidity is actually close to being as high as it’s been at any point post GFC even with the Fed’s QE program having been halted two years ago.
Reid concludes that after fears 12-18 months ago that we were starting to see an upcoming Fed tightening cycle and with concerns that we may actually see global central bank liquidity contract (there were even some fears of QT – quantitative tightening), the opposite has actually occurred.
As for Reid's declaration to "not fight central banks", he is of course right: while asset prices had disconnected with fundamentals many years ago, considering this unprecedented central bank step up in asset micromanagement, the only driver behind asset prices is the relentless wall of liquidity entering the global market at a record pace.
Incidentally the chart above also shows why there continues to be widespread, persistent skepticism about a so-called global recovery: after all, the record intervention by central banks meant to prop up asset prices (and, supposedly, economic growth) suggests that if anything, the global economy has never been weaker.