The Great Deleveraging: Can Momentum Return to Markets?

An industry-wide deleveraging across stocks, bonds, and hedge funds—along with reduced margin debt in Korea and Japan and unwinds of UST basis trades—has cooled markets, even as Warsh’s limited Fed guidance fuels debate. The piece weighs two futures: more deleveraging that could dampen risk assets, or a cleaner setup that might reaccelerate momentum, with US equities edging toward highs as inflation data shapes rate expectations.