ALERT: Liquidity Has Peaked & That Means Lower Stock Prices Ahead | Michael Howell

**SPEAKER_1** (0:00)
We all have that dream trip we've been wishing we could go on, but too often life or usually price gets in the way. That's why Priceline is here to help you turn your dream trip into reality. With up to 60 percent off hotels and up to 50 percent off flights, you can book everything you need for your next adventure. Don't just dream about that next trip, book it with Priceline. Download the Priceline app or visit priceline.com and book your next trip today.

**Michael Howell** (0:30)
What I'm really saying is that the odds of the S&P being at current levels by the year end, I think are low. In other words, I think the market is going to be lower by the year end. My view is that the assets that are very much out of favor now are the ones that are going to come back into favor.

**Adam Taggart** (0:55)
Welcome to Thoughtful Money. I'm Thoughtful Money Founder and your host, Adam Taggart. Welcoming you here for a very special discussion with Mr. Liquidity himself, Michael Howell, founder and CEO of Crossborder Capital, which is now rebranded as Global Liquidity Index. Michael, thanks so much for joining us today.

**Michael Howell** (1:14)
Well, great pleasure to be here. And I'm happy new year for everybody. Let's hope it's a good one, but I feel there's challenges ahead.

**Adam Taggart** (1:20)
All right, well, we'll pick up on that thread immediately, challenges ahead very quickly. Happy new year to you. Hope you're staying warm. I see you've got a nice turtleneck on, so hopefully it's not too cold in the UK right now.

**Michael Howell** (1:34)
Yeah, well, it's pretty cold. It's about minus five, which is pretty cold for the UK.

**Adam Taggart** (1:38)
Oh, yeah.

**Michael Howell** (1:38)
Snow everywhere, so there we go.

**Adam Taggart** (1:40)
Okay. Well, all right. Well, hopefully we can generate enough heat with this discussion that we can warm you up. All right. So we're going to get to your latest slides that you kindly prepared for us in just a second. Michael, but as I recall, you have your global liquidity cycles that your firm has identified. And in our previous conversations over the past couple of years, if I remember correctly, you had forecasted the current cycle to kind of peak out at the end of 2025, beginning of 2026 Is that still your expectation or have there been any developments like the Fed kind of returning to QE, even though they're not calling it QE, that might be pushing the duration of the cycle out further?

**Michael Howell** (2:29)
Yeah. All the evidence seems to show that the liquidity cycle is peaking pretty much around the time we said. I mean, we're still getting data coming in for the end of the year, obviously, but it looks as if the peak in liquidity probably occurred sometime around about Q4, maybe early Q4 or thereabouts.
That's despite the fact the Federal Reserve, as you've said, has moved back to a more benign liquidity posture. They were forced to do that because of the tensions in repo markets. But what the Fed is really doing is basically doing the minimum necessary, I would say. They're putting up a put under the repo markets, and that's probably enough to keep tensions away there. But it's not really enough to keep the bull market in stocks going through the year. And I think the monetary policy of the Fed is operating is probably, at best, good enough for a range-bound market this year. It may not be even enough for that, but we'll see. So, you know, our view is that the year is going to be challenging. Liquidity is not the force that it was. Certainly, if you look at the major advanced economies, I think China may be a different story, which we can get into. And, you know, one of the things that we're bringing out very clearly this year is that there is a significant divergence between what's going on in the US liquidity cycle and in the Chinese liquidity cycle. But that's a later story, I think.

**Adam Taggart** (3:53)
Okay. Well, I look forward to getting into all of that. I just had a conversation yesterday that I'd love to get your thoughts on, and it's about the guidance that US. Treasury Secretary Scott Bessent has been giving in terms of the criteria of what the administration is looking for in the next Fed head. And Scott Bessent is kind of leading that search. And he's essentially said, we want a Fed that is quick to respond to issues, but one that doesn't give too much persisting stimulus. And he cited things like the Fed buying mortgage-backed securities for years after they probably should have stopped, and housing prices were zooming to new highs and things like that. Do you take that into consideration at all in your forecasting?