Liquidity Trade Back On
The World Cup’s over but the war with Iran isn’t. More liquidity problems incoming.
London | Brisbane. 20 July 2026.
Although US M2 Money supply increased by US$3T over the last 3 years, that is not helping markets deal with a liquidity drought caused by the continuing war with Iran.
As countries and commodity traders have to raise USD to cover further purchases of oil, it leaves risk assets, which currently includes gold, at risk of further downside. The wave of IPOs hasn’t helped, as investment banks desperately seek investor capital for more new issues.
Those risk assets are trying to bottom out but recovery may take more time than expected. Even diehard US tech stocks have been under pressure, with IBM losing 25% of market cap in a single day and 20-30 drawdowns is semiconductors. Apple seems to be where the money is flowing to, up 20%+ in 3 weeks.
Will the FED come to the rescue if liquidity conditions get significantly worse? The market thinks absolutely not and Mr Warsh seems to be agreeing, although he’s talking about reinstating those money aggregates back into FED thinking. Ignored for decades, surely the amount of money in circulation must have something to do with monetary policy?
Warsh is trying to change the FED into a modern, more agile entity but its position as lender of last resort is still its key role. And he will be ready to act if needed. He should probably tell the banks and other market participants on 29th July.
Ian Reynolds: Trader & Investor | Former Bank Foreign Exchange Market Maker | Early investor in Bitcoin & Tech Founder. Helping investors understand the radical changes coming in macroeconomics and geopolitics.
Suberia Capital: Special situations investing for high net worth individuals.
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