Coin Bureau - This Drives All Markets: Why You Have to Pay Attention!

"Liquidity is a word you hear a lot these days. That’s not surprising when you consider that most asset prices in the modern day are driven by changes in the money supply, which is what liquidity is.

When liquidity rises, assets rise, and when liquidity falls, assets fall. The catch is that why this liquidity rises, why it falls, and when it moves between sectors of the economy and the markets is complex.

That’s why today we’re explaining the liquidity cycle in simple terms. Enjoy!"

~ Coin Bureau

This video explains the concept of the liquidity cycle, defining liquidity as a technical term for money flowing through the interconnected "pipes" of the economy and markets, which affects asset prices and economic strength. It details that new liquidity primarily comes from borrowing, both non-financial (like a business loan) and financial (like borrowing against assets), and the flow is determined by the supply of loans (driven by monetary and fiscal policy) and the demand for loans (driven by external factors like tariffs or market hype). The video introduces a model for the liquidity cycle, suggesting that asset classes benefit at different stages based on the central bank's interest rate cycle: bonds are best when rates are falling and bottoming, equities and risk assets benefit when rates start to rise and peak, and cash is king when rates start to fall again, indicating a market contraction. The hosts suggest the liquidity cycle lasts around four to five years, often aligning with the Fed's interest rate cycles, and emphasizes that the Fed historically struggles to avoid draining too much liquidity, which can lead to market crashes and recessions, ultimately underscoring the importance of monitoring liquidity flows.

TIMESTAMPS

0:00 Intro
1:10 What Is Liquidity In Finance?
4:09 Why Does Liquidity Rise And Fall?
8:37 Stages Of The Liquidity Cycle
13:17 How Long Do Liquidity Cycles Last?

Source - Coin Bureau YouTube: https://www.youtube.com/watch?v=_o48egmDHK8

Disclaimer: This video is provided for informational purposes only, and not offered or intended to be used as legal, tax, investment, financial, or any other advice.