December 21, 2018
Two months ago we first showed what Deutsche Bank dubbed “a quite fascinating statistic” namely that as of the end of October, 89% of assets that the German bank collects data on for its annual long-term study, had a negative total return year to date in dollar terms. This was the highest percentage on record based on data back to 1901, eclipsing the 84% hit in 1920.
Commenting on this striking observation of a market in which quite literally nothing worked, Deutsche Bank said that “this is what happens when the vast majority of global assets are expensive historically due to extreme monetary policy. When the tide goes out you’re more likely to get en masse negative months rather than rotation from day equities into bonds or visa-versa.”
Fast forward to today, when picking up on the theme of ebbing liquidity tides, in his last Early Morning Reid for 2018, Deutsche Bank’s Jim Reid writes that “2018 has been like a rebellious teenager suddenly aware of their own mind, independence, and the world around them after years of being guided and cajoled in everything they do.” He also notes that for him “peak QE moving to QT and the Fed raising rates four times this year has been enough to reverse a significant amount of the liquidity-inspired asset price returns of the pre-tightening era. A bit like Road Runner galloping off the cliff only to suddenly look down.”
But most importantly, Reid notes that the chart in question showing the percentage of global assets down on a dollar adjusted basis each year since 1901 was “the most requested chart we’ve ever been involved in”, and as updated below, 2018 continues to the be the worst year on record on this measure with 93% of assets currently down -worse than the years of the Gread Depression – and up from 89% at the end of October.
The record bearish print is made all the more fascinating,…