Previously, we shared the views of one of Goldman's top traders, Borislav Vladimirov, who argued that unless China does QE, it is facing an even deeper hole this time (especially after the market has priced in virtual nirvana). As Vladimirov framed it in very Shakespeareian fashion, for Chinawatchers, "QE or no QE, this is the real question." For the Goldman trader, that was also one of the 4 potential biggest surprises for 2025 beyond the US elections in one month. The other three are: i) a repricing is in the sustainability of higher than usual nominal growth in Europe and Japan; ii) Iran regime change, and iii) the risk that liquidity is much tighter than is generally perceived.
Below we excerpt from Vladimirov's note, focusing on each of these potential surprises (full note available to pro subscribers).
1. China: QE or no QE, this is the real question. PBOC has been doing QT for a decade, which given structurally loose general government fiscal has led to crowding out of highly leveraged and risky borrowers – households and developers in the first wave.
