G10 Excess Liquidity Indicator Turns Negative for First Time Since 2021
The G10 Excess Liquidity Leading Indicator has turned negative for the first time since the 2021 inflation shock, historically leading the S&P 500 by roughly six months and signaling potential downside for U.S. equities.
The G10 Excess Liquidity Leading Indicator, a key gauge of global financial conditions, has flipped negative for the first time since the inflation shock of 2021. The shift suggests a tightening of liquidity that could weigh on risk assets in the months ahead.
Historical data shows that the indicator tends to lead the S&P 500 by approximately six months. With the reading now in negative territory, analysts warn that U.S. equities may face increased headwinds if global liquidity continues to contract.
The indicator's turn comes amid ongoing central bank tightening and reduced market liquidity, raising the stakes for equity investors who have so far shrugged off similar warnings.
Source: First Squawk