Michael Howell

Around the peak, you would typically see commodity markets exploding upwards... resource stocks, energy stocks outperforming, beginning to see some evidence of utilities beginning to outperform and investors starting to reach towards stable demand consumer staple stocks. As the global liquidity cycle rolls over from speculation to a defensive posture, capital rotates out of long-duration growth assets and into cyclical value (energy/commodities) and defensive value (utilities/staples) that offer stable cash flows. LONG. Late-cycle and defensive sectors historically outperform as liquidity momentum slows and the real economy absorbs capital away from financial markets. A sudden re-acceleration of central bank quantitative easing could cause growth and tech stocks to resume their market leadership, leaving defensive sectors behind.

Around the peak, you would typically see commodity markets exploding upwards... resource stocks, energy stocks outperforming, beginning to see some evidence of utilities beginning to outperform and investors starting to reach towards stable demand consumer staple stocks. As the global liquidity cycle rolls over from speculation to a defensive posture, capital rotates out of long-duration growth assets and into cyclical value (energy/commodities) and defensive value (utilities/staples) that offer stable cash flows. LONG. Late-cycle and defensive sectors historically outperform as liquidity momentum slows and the real economy absorbs capital away from financial markets. A sudden re-acceleration of central bank quantitative easing could cause growth and tech stocks to resume their market leadership, leaving defensive sectors behind.

As that money comes into the system, it's going into risk assets and is going into gold as a monetary inflation hedge. So, that line likely is going higher. Gold has decoupled from US real interest rates and is now being driven by Asian liquidity. As the PBOC prints money, Chinese citizens and institutions are buying gold to hedge against domestic monetary debasement. LONG. The marginal pricer of gold is now Eastern liquidity, meaning PBOC easing will continue to drive gold higher regardless of what the US Federal Reserve does. If China successfully stabilizes its real estate market and economy, domestic capital might rotate out of gold and back into property or other local assets.

Around the peak, you would typically see commodity markets exploding upwards... resource stocks, energy stocks outperforming, beginning to see some evidence of utilities beginning to outperform and investors starting to reach towards stable demand consumer staple stocks. As the global liquidity cycle rolls over from speculation to a defensive posture, capital rotates out of long-duration growth assets and into cyclical value (energy/commodities) and defensive value (utilities/staples) that offer stable cash flows. LONG. Late-cycle and defensive sectors historically outperform as liquidity momentum slows and the real economy absorbs capital away from financial markets. A sudden re-acceleration of central bank quantitative easing could cause growth and tech stocks to resume their market leadership, leaving defensive sectors behind.

Around the peak, you would typically see commodity markets exploding upwards... resource stocks, energy stocks outperforming, beginning to see some evidence of utilities beginning to outperform and investors starting to reach towards stable demand consumer staple stocks. As the global liquidity cycle rolls over from speculation to a defensive posture, capital rotates out of long-duration growth assets and into cyclical value (energy/commodities) and defensive value (utilities/staples) that offer stable cash flows. LONG. Late-cycle and defensive sectors historically outperform as liquidity momentum slows and the real economy absorbs capital away from financial markets. A sudden re-acceleration of central bank quantitative easing could cause growth and tech stocks to resume their market leadership, leaving defensive sectors behind.

The gold-oil ratio historically averages 20:1. With gold at 4000-5000, that implies oil above $200/barrel. Oil looks cheap relative to gold, and rising liquidity needs from a strong economy support higher oil prices.

Cyclical value stocks, resources, and energy sectors outperform in the speculation phase of the liquidity cycle as the real economy gains traction and commodity prices rise.

Cyclical value stocks, resources, and energy sectors outperform in the speculation phase of the liquidity cycle as the real economy gains traction and commodity prices rise.

Treasury QE (shifting issuance to bills) is providing liquidity that may lead to stabilization in Bitcoin prices in the short term, as shown by a correlation chart.

In a long-term monetary inflation environment, good quality equities with pricing power are essential because they can pass on cost increases and should be held as core holdings.

In the speculation phase, investors should increase exposure to bond duration as demand for safe assets rises due to increasing systemic risk and falling term premia; this is part of a defensive shift.

Prime residential real estate is a good long-term investment in a monetary inflation environment and should be part of a core portfolio.

China will be the only bull market that I would be convinced of this year... The thing to look at are things like Chinese technology stocks. The People's Bank of China is injecting massive amounts of liquidity (estimated at 7 trillion yuan) to bail out its debt and real estate crisis. Because of capital controls, this liquidity is trapped domestically and will flow into Chinese risk assets. LONG. China's liquidity cycle is expanding and completely decoupled from the tightening Western cycle, providing a strong macro tailwind for Chinese equities. Geopolitical tensions, new US tariffs, or a failure of the PBOC's stimulus to restore domestic confidence could derail the equity rally.

If the bond markets face declining liquidity then they're going to act with their feet and basically yields will start to come down. So, I think you could see potentially here the risk of a bullish flattening. Consensus is positioned for a steepening yield curve, but term premiums are actually peaking. As liquidity tightens and markets move to a risk-off stance, investors will seek the safety of government bonds, driving mid-duration yields lower. LONG. Mid-duration bonds offer a safe haven and capital appreciation potential as the yield curve flattens in response to a slowing liquidity cycle. A resurgence of inflation caused by a robust real economy could force the Fed to maintain or raise rates, causing bond yields to spike and prices to fall.

China will be the only bull market that I would be convinced of this year... The thing to look at are things like Chinese technology stocks. The People's Bank of China is injecting massive amounts of liquidity (estimated at 7 trillion yuan) to bail out its debt and real estate crisis. Because of capital controls, this liquidity is trapped domestically and will flow into Chinese risk assets. LONG. China's liquidity cycle is expanding and completely decoupled from the tightening Western cycle, providing a strong macro tailwind for Chinese equities. Geopolitical tensions, new US tariffs, or a failure of the PBOC's stimulus to restore domestic confidence could derail the equity rally.