Liquidity expert Michael Howell: Global liquidity has peaked, and the best window for the stock market has passed.

The global liquidity cycle is turning, and the golden window for asset allocation may have closed.

Michael Howell, founder of CrossBorder Capital and liquidity expert, said in a podcast interview on July 19 that the core indicator that tracks global liquidity momentum peaked in the fourth quarter of last year and has been slowing down ever since. This means the liquidity tailwind that previously drove stock market gains is fading, and those who continue to bet on the old logic will face increasing risks.

In Howell’s asset rotation framework, the current market has entered the "speculation phase"—commodities are strong, and the yield curve is bearishly flattening, both highly consistent with his model. He warns that commodity trading has lasted 12 to 15 months, which, according to his cycle chart, is a late-cycle characteristic, not an early-cycle signal.

Analysis points out that for portfolios still heavily invested in commodities, Howell’s framework means it is necessary to closely monitor the next pivot point—from commodities to cash, then to long-duration government bonds, rather than assuming current trades can continue compounding gains.

65-Month Cycle: A Curve Unchanged for 25 Years

Howell’s analytical framework is built around a core tool: the 65-month global liquidity cycle. He first used Fourier analysis to fit this curve in 2000, and has never recalculated its parameters since.

This persistence is not stubbornness, but is supported by independent verification. Reportedly, the "Foundation for the Study of Cycles" independently fed his data into its own algorithms and ultimately reached the exact same 65-month cycle figure, providing cross-validation across institutions for this curve.

Based on the data, CrossBorder Capital currently tracks about 90 financial systems, collects about 30 data series per country, and increased the data update frequency to daily nine months ago.

Howell has worked deeply in this field for over thirty years, and his core proposition has remained consistent: Monetary liquidity precedes economic fundamentals and geopolitics in driving market prices.

Howell emphasizes that his judgments are based on the rate of change of liquidity, not its absolute level. On the 65-month cycle, momentum bottomed out at the end of 2022, then rebounded, peaked in the fourth quarter of last year, and has been slowing down since.

This distinction is crucial. Even if the absolute scale of global liquidity remains high, the inflection point in momentum alone is enough to change the relative ranking of asset performance. It is precisely this inflection point that drives his asset allocation adjustments.

Fixed Rotation Sequence: From Stocks to Commodities, then Cash and Long Bonds

Howell overlays a fixed asset rotation sequence onto the liquidity cycle:

Liquidity momentum upward phase: stocks lead;Near the cycle peak: commodities top out;Momentum fallback phase: cash outperforms risk assets, volatility in risk assets rises but returns drop;Cycle bottom: long-duration government bonds perform best.

According to this sequence, the best window for stocks appears during the upward phase of liquidity momentum, but that phase has already passed. The current "speculation phase" sees strong commodities and a bearishly flattening yield curve emerge simultaneously, in complete alignment with model predictions. Commodity trading has lasted 12 to 15 months, which in Howell’s framework is a typical late-cycle, not early-cycle, characteristic.

Notably, Raoul Pal, founder and CEO of Global Macro Investor (GMI), in his "Everything Code" framework built a similar underlying logic—the global liquidity cycle, with similar frequency, drives all risk assets, and counter-cyclical moves are costly.

However, there is a key operational difference between the two. Pal, under a long-term narrative of currency devaluation, chooses to structurally overweight risk assets; whereas Howell’s current judgment is that liquidity momentum has begun to fade, and now is not the time to increase risk exposure.

In one sentence: it’s the same engine, Pal is in high gear, Howell is already downshifting.

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