This is now front and centre for the global growth accident coming swiftly down the pipe. As the Fed tightens, and goods demand normalises let alone falls, the US inventory mountain built up owing to excess demand and supply-side constraints is going to let go and be run down just as both triggers loosen. This will slam US growth as it happens but, even more problematic, it will crush China with an external shock even as its domestic demand lurches through a property adjustment and OMICRON.
And beware that there is another inventory mountain that will also collapse as the above happens. Commodities are being hoarded by markets as a stagflation hedge against the inflation embedded in the US inventory mountain, despite rotten underlying demand from China. When one mountain collapses, the other will follow.
Morgan Stanley has the note:
