Cross-Asset Liquidity Strategist, CrossBorder Capital

Michael J. Howell

Cross-Asset Liquidity Strategist

Implementing Research Using Alt Data & AI

CrossBorder Capital

CrossBorder Capital is a London-based independent investment advisory firm. Founded in 1996, it exploits a gap in the investment arena by focusing on Central bank liquidity. 

It specialises in the monitoring and analysis of global liquidity flows - an important determinant of asset prices, from currencies through to bonds, equities and real estate.

CrossBorder Capital implements its investment strategy and currently manages over US$ 350m.


Cross Asset Strategy

<ul>
<li>Did Treasury Secretary Yellen's recent trip lead to a US-China Accord that allows the US dollar to weaken and China's PBoC to ease again?</li>
<li>Markets are acting as if this happened, but in reality this 'accord' simply reinforces existing forex and liquidity trends</li>
<li>
Emerging Market liquidity is currently high. This is inconsistent with an upcoming recession, but aligns with a rising Global Liquidity cycle. Expect more US and Chinese easing.</li>
</ul>


Did Treasury Secretary Yellen's recent trip lead to a US-China Accord that allows the US dollar to weaken and China's PBoC to ease again?
Markets are acting as if this happened, but in reality this 'accord' simply reinforces existing forex and liquidity trends

Emerging Market liquidity is currently high. This is inconsistent with an upcoming recession, but aligns with a rising Global Liquidity cycle. Expect more US and Chinese easing.


A Secret US-China Accord? Will It Boost Global Liquidity?

Global Multi-Asset Investment Strategist, True Insights

Jeroen Blokland

Global Multi-Asset Investment Strategist

Build Well-Diversified Multi-Asset Portfolios

True Insights

Our research helps investors build well-diversified multi-asset portfolios and profit from market developments. In addition, our unique and proven Macro – Sentiment – Valuation (MSV) investment framework ensures a consistent flow of new investment opportunities. Together with our market views, these opportunities will be reflected in our live ETF-based Global Multi-Asset Portfolios.

Macroeconomics

<ul>
<li>Comparable to the China Growth Scare of 2015-2016, the Manufacturing PMI is below 50, imports are falling, and deflation worries are rising.</li>
<li>The real estate crisis is worse than in 2015-2016, with housing prices falling again, floor space under construction declining, consumer confidence near historic lows, and LGFV financing issues increasing.</li>
<li>Unlike 2015 (and 2022), the current depreciation of the Chinese Yuan has not (yet) been accompanied by falling stock prices. </li>
</ul>


Comparable to the China Growth Scare of 2015-2016, the Manufacturing PMI is below 50, imports are falling, and deflation worries are rising.
The real estate crisis is worse than in 2015-2016, with housing prices falling again, floor space under construction declining, consumer confidence near historic lows, and LGFV financing issues increasing.
Unlike 2015 (and 2022), the current depreciation of the Chinese Yuan has not (yet) been accompanied by falling stock prices. 


China: An Accident Waiting to Happen? Comparing the Current Chinese Economy to the One in 2015

<ul>
<li>The Federal Reserve raised interest rates by another 25 basis points, expecting inflation to come down 'not so quickly.'</li>
<li>Powell feeds the overly-enthusiastic market narrative by betting against history, anticipating that the current Fed tightening cycle will not significantly push up the US unemployment rate.</li>
<li>Powell and the Fed dodged accountability back in February, and the PacWest collapse hours after stating banking 'conditions have broadly improved' is very painful and disturbing.</li>
</ul>


The Federal Reserve raised interest rates by another 25 basis points, expecting inflation to come down 'not so quickly.'
Powell feeds the overly-enthusiastic market narrative by betting against history, anticipating that the current Fed tightening cycle will not significantly push up the US unemployment rate.
Powell and the Fed dodged accountability back in February, and the PacWest collapse hours after stating banking 'conditions have broadly improved' is very painful and disturbing.


Powell Press Conference: Persistent and Painful

<ul>
<li>‘We lower the weight of equities. With markets pricing several Fed rate cuts, valuation rising, and earnings expectations too upbeat, catalysts for further increases are vanishing. </li>
<li>After the significant decline in March building permits, the implied recession odds linked to this indicator are rising again.</li>
<li>There's a classic example of reverse operating leverage going on: earnings growth is negative, while sales growth is positive. Most of the time, this is followed by a recession.</li>
</ul>


‘We lower the weight of equities. With markets pricing several Fed rate cuts, valuation rising, and earnings expectations too upbeat, catalysts for further increases are vanishing. 
After the significant decline in March building permits, the implied recession odds linked to this indicator are rising again.
There's a classic example of reverse operating leverage going on: earnings growth is negative, while sales growth is positive. Most of the time, this is followed by a recession.


Weekly Market Monitor (16) - The Odds of a Recession Is Rising; Earnings Just Don’t Know It Yet

<ul>
<li>How to Invest in 2023 and 2024 based on the evolving cycle of Global Liquidity, which likely bottomed in October 2022 and is now rising again</li>
<li>
QT is effectively dead. Major stock and bond markets may range in 2023, but certain areas, like cyclical, commodities and EM, will show strong gains</li>
<li>Three major changes are driving Global Liquidity higher: Fed stops QT, PBoC eases liquidity aggressively and collateral supply improves as bond volatility drops. MOVE index important</li>
</ul>


How to Invest in 2023 and 2024 based on the evolving cycle of Global Liquidity, which likely bottomed in October 2022 and is now rising again

QT is effectively dead. Major stock and bond markets may range in 2023, but certain areas, like cyclical, commodities and EM, will show strong gains
Three major changes are driving Global Liquidity higher: Fed stops QT, PBoC eases liquidity aggressively and collateral supply improves as bond volatility drops. MOVE index important


Global Liquidity & Asset Allocation in 2023: Is QT Dead?

China

The MSCI Em (Emerging Markets) Index is a free-float weighted equity index that captures large and mid cap representation across Emerging Markets (EM) countries. The index covers approximately 85% of the free float-adjusted market capitalization in each country.

MSCI Emerging Markets Index (MXEF INDEX)

A Secret US-China Accord? Will It Boost Global Liquidity?

Treasury Secretary Yellen's recent trip may have led to a secret US-China Accord that allows the US dollar to weaken and China's PBoC to ease...

Michael J. Howell

China: An Accident Waiting to Happen? Comparing the Current Chinese Economy to the One in 2015

Current economic conditions in China increasingly resemble those of 2015-2016, with some looking worse than eight years ago.

Jeroen Blokland

Powell Press Conference: Persistent and Painful

Powell is not thinking about rate cuts, contrary to what markets believe. Unfortunately, he also thinks banking conditions have 'broadly improved.'

Jeroen Blokland

Weekly Market Monitor (16) - The Odds of a Recession Is Rising; Earnings Just Don’t Know It Yet

Welcome to the weekly Market Monitor, keeping you updated on the week’s most important charts and developments in financial markets.

Jeroen Blokland

Global Liquidity & Asset Allocation in 2023: Is QT Dead?

Summary of recent CrossBorderCapital Webinar on Global Liquidity evidencing major inflection of liquidity cycle, spurred by PBoC ease, end of Fed...

Michael J. Howell