How 2020 Changed Investing: Macro Frameworks vs. AI & Liquidity

The Shifting Nature of Crises

• ⚠️ Crises no longer have the same left-tail risk; the distribution is skewed, with more potential for long-tail upside.
• 💡 Post-2022 presented incredible opportunities, particularly in equity trades and long-duration equities, due to high inflation expectations.

The Evolution of Stimulus and Liquidity

• 🏦 The methodology for liquidity injection, first seen tentatively after the Global Financial Crisis, became massive following the 2020 crisis.
• 🌊 Unlike past crises where liquidity was gradually relieved, there is now an ocean of liquidity at the first whiff of trouble.
• 📈 This constant liquidity management raises questions about whether asset prices can truly fall, suggesting that without COVID, a recession might have been avoided.

The End of Bear Markets?

• 💲 Theoretically, if the goal is to avoid bear markets, printing dollars can ensure that asset prices do not fall in nominal terms.
• ⚠️ A fear exists of the 'this time is different' trap, as the nature of future shocks is unknown.

Potential Future Shocks and Market Reactions

• 💥 A war, for instance, could lead to a sell-off in US Treasury bonds and a rally in defense stocks, causing everything to go up.
• ❓ It's uncertain what kind of shock could trigger an old-style recession given current complacency and market management strategies.