“We got Condition Red and we’re definitely expecting rain.”

Negative Marshallian K foreshadowed S&P 500 corrections in 2010 and 2018

Excess liquidity is the ratio of a monetary aggregate to nominal GDP. It is often referred to as the “Marshallian K”, which is equivalent to the inverse of the “velocity of money.”

The Marshallian K fell below zero in 2010, a year when the S&P 500 Index suffered a 16% correction. A similar dip in 2018 portended a selloff that almost killed that bull market.

The indicator went negative faster than ever.

Here is Bloomberg on the prospect of rain.

https://www.bloomberg.com/news/articles/2021-08-11/liquidity-is-evaporating-even-before-the-fed-taper-hits-markets

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