Michael Howell: Liquidity Has Turned, Low Quality Returns Ahead for Stocks, and Real Driver of Gold

Summary

Michael Howell, CEO of CrossBorder Capital, explains that the global liquidity cycle peaked in late 2024, pulling money from financial assets into the booming real economy. This 'speculation phase' compresses P/E multiples, raises bond yields, pressures crypto, and fuels commodities, leading to low-quality equity returns. He argues gold's surge is driven by PBOC liquidity injections to devalue the yuan internally, not the debasement trade, and recommends buying gold and silver on weakness while avoiding bonds and being selective on Wall Street. He also highlights commodities as a leading indicator and Chinese equities as an anti-cyclical alpha play.

• Global liquidity cycle peaked in Q3/Q4 2024; financial liquidity now being pulled into the real economy, compressing P/E multiples.
• Current 'speculation' regime features choppy equities, rising bond yields, strong commodities, and pressured crypto.
• Gold's rally is primarily driven by China's PBOC injecting liquidity, with Chinese retail buying on the Shanghai Gold Exchange.
• Advised to buy gold and silver on weakness as monetary inflation hedges, and to avoid US bonds due to rising yields.
• US equities expected to be range-bound with downside risk; selectivity is crucial.
• Commodities are rising on real economy demand and will dip before the economic peak, acting as a leading indicator.
• Chinese markets offer potential alpha as their liquidity cycle runs counter to the West.
• Treasury buyback programs aim to cap bond volatility but risk a Japan-style yield spike.