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ITPM Flash Summary – Edward Shek on Liquidity Blows and Market Rotation
- The Institute Trader
- Mar 27
- 4 min read
Global Liquidity Flows: Why They Matter More Than Ever
In his signature ITPM Flash style, Edward Shek cuts through the noise and zooms in on one of the most overlooked forces in the market: liquidity.
More specifically? The flows of global capital—what’s been pouring into the US for years—is now showing signs of reversing. That shift, subtle but significant, could mean a major repositioning of global portfolios, with huge implications for traders and long-term investors alike.
The US Has Been the Star — But the Plot Might Be Changing
Over the last decade (especially post-COVID), the US has been the darling of global markets. And honestly? That made perfect sense:
US earnings outpaced the rest of the world
Tech giants dominated the AI revolution
Risk-free yield was higher than anywhere else
Global managers were underweight Europe and Asia, but overweight US—big time
All of this led to a world where US equities soaked up global capital like a sponge. And it worked... until now.
Meet Barry and Sally: The Psychology of Market Turns
Shek brings in two fictional traders—Barry and Sally—to illustrate the real-world mindset behind these market moves:
Barry Buy-the-Dip: Confident. Has always been rewarded for jumping into market pullbacks.
Sally Sell-the-Rally: More cautious. Sees the writing on the wall when things look too good to be true.
As Ed points out, Barry has always been right... until he’s not. The market has changed. Now, even solid names like Arista Networks and Vertiv have taken 30–40% hits—and they’re not bouncing back.
Why? Because institutional capital isn’t buying the dip anymore.
ITPM Let’s Talk Charts: Liquidity Rotations Are Already Happening
Using data from Bank of America’s Fund Manager Survey, Shek shows:
Record rotation out of US stocks between December and March
Rising allocations into Europe, China, and Japan
Growing sentiment that the US economy is weakening, while other geos may be turning a corner
It’s not panic. It’s smart money rebalancing. But when they all rebalance at once? It creates air pockets in the market—sudden sell-offs with no buyers underneath.
The Yen Carry Trade: A Sleeping Giant Waking Up?
Here’s where things get spicy. Japan—yes, Japan—is once again a key player.
For years, the yen carry trade worked like a charm:
Borrow cheap in yen
Lend or invest in US assets (for higher yield)
Pocket the difference
But if Japan raises interest rates, that whole dynamic changes. The carry trade unwinds, and that’s another wave of capital potentially pulling out of the US—fast.
Shek shows how interest rate expectations in Japan have shifted rapidly, and it’s a policy clue that could shake global markets.
Why Smart Money Isn't Buying the Dip
When everything slows down—US growth, earnings, AI hype, confidence—liquidity becomes shy.
Even high-quality stocks are getting sold and not recovering, which tells us one thing: the cavalry (big money) hasn’t arrived. Ed suggests:
Short-term traders might still play the bounce
But long-term investors are sitting tight
There’s not enough conviction to re-enter in size
In short, it’s not about earnings misses or scary headlines—it’s about the flow of capital and the lack of fresh buyers.
The Real Risk? A Slow Decline, Not a Crash
Shek reminds us: the market doesn’t need a full-blown recession to sell off.
Even a slow grind lower in macro data can send liquidity flows into “phase two”—where funds stop buying and start rotating elsewhere.
He warns of the domino effect:
If the jobs market weakens, spending slows
Then come credit events, rising defaults, and margin calls
Especially for those scraping by with limited savings and multiple job incomes
All of this could cascade—even if there’s no official “hard landing.”
Final Thoughts: Don’t Waste a Good Selloff
Shek leaves us with a bit of old-school trader wisdom:
“Don’t waste a good crisis. Don’t waste a good potential sell-off.”
This isn’t about fear—it’s about preparation. If the unimaginable happens, will your portfolio survive it... or capitalize on it?
Now’s the time to take a breath, re-evaluate risk, and maybe, just maybe, think more like Sally than Barry.
FAQs
Q: What is ITPM Flash?
A: ITPM Flash is a video series from the Institute of Trading and Portfolio Management, featuring deep-dive commentary from senior mentors like Edward Shek.
Q: Who is Edward Shek?
A: Edward Shek is a Senior Trading Mentor at ITPM, known for blending macroeconomic insights with practical trading strategy.
Q: What’s the yen carry trade and why does it matter?
A: It’s a global capital flow strategy where investors borrow in yen and invest elsewhere for higher returns. If Japan raises rates, the unwind could hit US markets hard.
Q: Why are US stocks under pressure even if earnings are okay?
A: Liquidity flows are shifting. Institutional investors are reallocating, and crowded trades are getting trimmed—even if the fundamentals are solid.
Want to Learn More?
If this ITPM Flash summary piqued your interest, there’s a ton more to explore. Check out my reviews of the ITPM courses and how the education helped me run a long short portfolio.
Disclaimer:
The information provided in this article is for general informational purposes only. It is not intended to be financial advice and should not be construed as such. Always consult with a qualified financial advisor before making any investment decisions. The author and publisher are not liable for any financial losses or damages that may result from the use of this information.