Monetary Matters with Jack Farley The Speculation Phase Begins | Michael Howell on Liquidity Cycle, China, Fiscal Dominance, and Dollar Weakening
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Aug 3, 2025 
Michael Howell, an economist from Crossborder Capital specializing in global liquidity, shares his insights on the current liquidity cycle. He discusses how a weakening U.S. Dollar is prompting global monetary easing, particularly from China's central bank. Howell also details the shift from monetary to fiscal dominance in bond markets and warns against risks as the economic cycle evolves. He highlights the cyclical nature of liquidity and its implications for asset allocation, predicting a bullish backdrop for financial markets through 2026.
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Speculative Stocks Signal Cycle Peak
- Late liquidity cycle sees speculative, low-quality stocks rally strongly, often signaling a market top.
- This shift from high to poor quality stocks is a typical pattern near cycle peaks.
Funding Crisis Could End Liquidity Cycle
- Market crashes in 2026 are likely triggered by a government debt funding crisis rather than a traditional business cycle event.
- Monitoring bond market signals like repo spreads and volatility indexes helps assess timing of cycle end.
Tariffs Cause Growth Slowdown, Inflation
- Tariffs act as negative supply shocks causing slower growth and higher prices.
- Most tariff impacts are discounted by markets already, with potential for moderate inflation rise, but limited growth stall.
