Markets Are Misreading A Late Cycle Liquidity Crunch | Michael Howell

Summary

Michael Howell of CrossBorder Capital explains that global liquidity is inflecting lower, moving the market into a late-cycle speculation phase ahead of potential turbulence. He argues that this leads to a flattening yield curve, rising commodities, and underperformance for risk assets like crypto. The discussion covers the divergence between the liquidity cycle and the business cycle, Treasury-driven liquidity, and asset allocation implications for the coming years.

• Global liquidity cycle is turning lower, entering a late-cycle speculation phase.
• Yield curves are expected to flatten by mid-year due to tightening liquidity.
• Commodities, especially oil, are poised to rise as the real economy accelerates.
• Cyclical value stocks, resources, and energy sectors tend to outperform in this phase.
• Government bonds become attractive safe havens as liquidity tightens and risks build.
• Crypto assets are highly sensitive to liquidity and likely to face headwinds.
• Treasury buybacks aim to suppress bond volatility (MOVE index) to support liquidity.
• Potential regime shift under a new Fed chair could involve deregulation and changed liquidity provision.