Fifteen years ago Ben Bernanke had to ask for $700bn to bail out the US Financial system otherwise "We might not have an economy on Monday", but the often overlooked reason why a financial crisis became an economic one was the role of the Money Market Funds which were effectively funding corporate working capital through Commercial Paper markets. When they froze, so did the economy. Fifteen years on, they are once again dominant, but this time crowding out bank deposits rather than bank loans. Let's hope they don't cause a similar, but different liquidity problem this time.

Recency Bias makes us focus on what just happened and ignore even recent history, while the end of history illusion makes us think that there will be less change in the next five years than in the last five. A quick recap on the last 5 Q4 periods reminds us of the dramatic changes we have seen, and while the next 5 years may not be as dramatic, we would see these changes as pressaging further changes on paths now revealed, be it BRICS+ disrupting the financial system, AI and working from home disrupting the service sector globally or just the retsoration of the proper price of money and liquidity through the end of QE.

Two steps forward, one (or two) step(s) back. After a strong July, when markets seemed to broaden out from the narrow concentration on mega cap tech stocks, investors were once again frustrated to see most stocks and markets give everything back in August, leaving many sectors, stocks and themes once again flat for the year. We believe that the proximate cause of the weakness in August was the late July bond sell off from Japan that spilled across to trigger trading stop losses in equity markets at a time when many were closing books for the holidays. Meanwhile, the high returns available on risk free $ cash are helping the dollar while continuing to impose something of a liquidity drought across other markets, including further out on the bond curve and many medium term risk managers are happy to delay the decision on searching for real returns in equities. China has dominated the narrative in August, but the long term investors need to start to think of the implications of the new BRICS 11 grouping, not least on account of the dominance of resource rich nations and the Sovereign Wealth funds they support...and how they are going to spend that money going forward.