Increase in dollar liquidity has been a big driver of markets recovery since start of the year. There’s evidence this trend can continue for the next several weeks but there’s still multiple headwinds that could drag on markets as we get closer to Q1-Q2. If we’re looking at the market with a longer time horizon, the global liquidity cycle started showing signs of bottoming back in Nov-Dec which coincided with the recent lows. The move to a more expansionary global liquidity environment is, in our view, the most important catalyst for a renewed and sustainable bull run. The effects of this reversal on risk markets usually lags anywhere from 6-12 months, which is why we’re more bullish on 2H 2023 and 2024, though we could see prices started to rise in anticipation of this environment before then (one could argue we’re seeing some of that right now with many people trying to “front run the front run” in a sense).

For more detail on the biggest trends driving markets, I highly recommend you read our Markets Year Ahead report.