Global liquidity cycles are undergoing a critical inflection, and an expert with over three decades of deep experience in the field has issued a clear warning: a core indicator tracking global liquidity momentum peaked in the fourth quarter of last year and has been decelerating ever since. This means the liquidity tailwind that previously propelled equity markets higher is fading. Investors who continue to bet on the old logic face mounting risks.

CrossBorder Capital founder and liquidity expert Michael Howell elaborated on this assessment during a podcast interview on July 19. Under the asset rotation framework he has constructed, the market has now entered what he calls the “speculative phase”—marked by persistently strong commodities and a bear-flattening yield curve, both of which align closely with his model. He specifically cautioned that the commodities trade has been running for 12 to 15 months, which, according to his cycle roadmap, is a classic late-cycle characteristic, not an early-cycle signal as some market participants believe.

Market analysts note that for portfolios still heavily weighted in commodities, Howell’s framework implies the need to closely monitor the next transition point—rotating from commodities to cash, and then gradually into long-duration Treasuries—rather than assuming the current trade can compound indefinitely.

The 65-Month Cycle: A Curve Unchanged for 25 Years

Howell’s analytical framework rests on a core quantitative tool: the 65-month global liquidity cycle. He first fitted this curve using Fourier analysis in 2000 and has never re-estimated its parameters since.

This persistence is not born of stubbornness but is backed by robust independent validation. According to disclosures, the Foundation for the Study of Cycles independently fed Howell’s data into its own algorithms and arrived at the exact same 65-month cycle figure, providing cross-institutional verification for the curve.

On the data front, CrossBorder Capital currently tracks approximately 90 financial systems, collecting roughly 30 data series per country, and upgraded its data frequency to daily nine months ago. Howell, who has worked in this field for over three decades, has consistently maintained one core thesis: money flows precede economic fundamentals and geopolitics, serving as the primary force driving market prices.

Howell particularly emphasized that his judgments are based on the rate of change in liquidity, not its absolute level. On the 65-month cycle, momentum bottomed in late 2022, subsequently recovered, peaked in the fourth quarter of last year, and has since begun to decelerate.

This distinction is critical. Even if the absolute scale of global liquidity remains elevated, the inflection point in momentum alone is sufficient to alter the relative ranking of asset performance. It is precisely this inflection point that drives Howell’s asset allocation adjustment recommendations.

Asset Transition Path Under a Fixed Rotation Sequence

Howell overlays a fixed asset rotation sequence onto the liquidity cycle, creating a clear phase roadmap:

Liquidity momentum rising phase: Equities lead, representing the golden window for risk asset allocation;
Near the cycle peak: Commodities reach their zenith, and the market enters the speculative phase;
Momentum deceleration phase: Cash begins to outperform risk assets; risk asset volatility rises while returns decline;
Cycle trough: Long-duration Treasuries perform best, becoming a safe haven for capital.

According to this sequence, the optimal window for equities occurs during the liquidity momentum upswing—and that phase has already passed. The current “speculative phase,” characterized by simultaneous commodity strength and a bear-flattening yield curve, aligns perfectly with the model’s predictions. Howell explicitly noted that the commodities trade has persisted for 12 to 15 months, which, within his framework, is a hallmark of the late cycle, not the early cycle.

Same Engine, Different Gears: Two Frameworks Diverge

Notably, Raoul Pal, founder and CEO of Global Macro Investor (GMI), has constructed a similar underlying logic in his “Everything Code” framework—that global liquidity cycles drive all risk assets at similar frequencies, and betting against this trend is costly.

However, the two experts diverge at the operational level. Under a long-term narrative of currency debasement, Pal chooses to be structurally long risk assets, maintaining elevated risk exposure. Howell’s near-term assessment, by contrast, is that liquidity momentum has already begun to fade, and now is not the time to add risk.

To summarize this divergence in a single sentence: same engine, but Pal is in high gear while Howell is already downshifting. For investors, this split reflects the complexity of the current macro environment—where a long-term currency depreciation trend coexists with a medium-term deceleration in liquidity momentum, significantly raising the difficulty of asset allocation.

Howell’s framework suggests that investors still chasing the commodities rally need to be alert to the risk of a cycle shift. Based on historical patterns, as liquidity momentum retreats from its peak, the appeal of cash will gradually rise, followed by long-duration Treasuries delivering their best performance phase at the cycle trough. This rotation path provides a reference timeline for defensive portfolio adjustments.