The liquidity cycle

(images source from cross border capital, Michael Howell’s framework)
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Riding the Liquidity Cycle: A Practical Playbook for Investors

Michael Howell’s central insight is simple but profound: liquidity drives markets. If you can map the global liquidity cycle, you can position ahead of turning points in risk appetite, yields, and sector leadership.

Liquidity Leads Everything
Liquidity doesn’t just matter—it leads. Historical evidence shows that shifts in global liquidity tend to lead markets by 6–9 months and the economy by 9–12 months

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CrossBorder Capital’s framework breaks this cycle into four repeating phases—and shows how asset allocation should adapt to each stage.

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The Liquidity Cycle in Four Phases

1. Rebound - Liquidity injection starts after a squeeze
   • Early signs of recovery in cyclicals and technology sectors
   • Equities begin to improve, with cyclical and technology sectors showing strength
   • Credit assets perform also perform well as funding ease
   • Bond duration lags as yields rise
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2. Calm - Liquidity is abundant, risk appetite returns
   • Investors reengage across risk assets, broad equities move higher with strong participation
   • commodities strengthen alongside improving demand
   • credit assets remain supportive, though less strong than equities
   • bond durations underperforms
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3. Speculation - Liquidity remains high, excess builds