Weekly Commentary: Bubbles, Dams, War And Cracks

2026-03-21 10:14:00 ET

Global markets are at the precipice. Nerves are increasingly frayed, yet complacency remains well entrenched. This is not uncharted territory. De-risking/deleveraging approaches critical momentum, before some policy response swiftly turns things around. The “Fed put,” the “TACO put,” the global policymaker “put”…

When speculative deleveraging momentum gathered pace in the summer of 2019, the Federal Reserve restarted QE. When autumn 2022 UK gilt deleveraging sparked global bond deleveraging, the Bank of England postponed QT and intervened with aggressive gilt purchases (QE) and a temporary liquidity facility.

As the March 2023 SVB/bank crisis spurred fear and deleveraging, the Federal Reserve and Federal Home Loan Banks responded urgently with $500 billion of liquidity injections. During the August 2024 yen “carry trade” unwind (Nikkei plunged 12.4% on August 5th), the forces of de-risking/deleveraging were abruptly reversed by BOJ Governor Shinichi Uchida’s reassuring comments (BOJ won’t raise rates when markets are unstable)....

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