G10 Excess Liquidity Indicator Turns Negative, Pointing to Weaker Semiconductor Stocks
A key liquidity gauge has turned negative for the first time since 2024, historically leading the semiconductor index by six months, potentially signaling weaker SOX performance ahead.
The G10 Excess Liquidity Leading Indicator has turned negative for the first time since 2024, signaling that money supply growth across G10 economies is no longer outpacing economic growth. This metric compares the rate of money supply expansion with economic activity; when money supply grows faster than the economy, the excess liquidity tends to support asset prices.
Historically, this indicator has led the performance of the Philadelphia Semiconductor Index ($SOX) by approximately six months. With the gauge now in negative territory, the historical relationship suggests weaker semiconductor stock performance over the coming months.
Market participants may want to monitor liquidity conditions closely.
Source: The Kobeissi Letter