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>Investment cycle is in late-stage Speculation, with Turbulence next up</li>
<li>Falling Global Liquidity a major head-wind. Liquidity turns sub-par by early-2022</li>
<li>Start to consider Volatility-based investment strategies and more cash</li>
<li>Traditional economic analysis provides little help in asset allocation. Flow of funds analysis works far better</li>
</ul>


Investment cycle is in late-stage Speculation, with Turbulence next up
Falling Global Liquidity a major head-wind. Liquidity turns sub-par by early-2022
Start to consider Volatility-based investment strategies and more cash
Traditional economic analysis provides little help in asset allocation. Flow of funds analysis works far better


Is There A Bear Out There? Where Are We In The Global Investment Cycle?

<ul>
<li>Inflation fears are being fulfilled. High pass-thru of price shocks</li>
<li>Policy-makers will react (wrongly) by hastening ‘tapering’</li>
<li>This may trigger upcoming ‘liquidity crises’, and</li>
<li>Risk sharper World economic slowdown</li>
</ul>


Inflation fears are being fulfilled. High pass-thru of price shocks
Policy-makers will react (wrongly) by hastening ‘tapering’
This may trigger upcoming ‘liquidity crises’, and
Risk sharper World economic slowdown


<ul>
<li>Latest data evidence a slowing World economy, led down by Asia
</li>
<li>Falling Global Liquidity is a likely reason</li>
<li>Bonds have recently proved prescient. Yields fall with slowing economies
</li>
<li>Digging deeper inside the bond market points to a coming ‘W’-shaped rebound
</li>
<li>Conclusion: by mid-2022, economies re-establish their pre-COVID trends</li>
</ul>


Latest data evidence a slowing World economy, led down by Asia

Falling Global Liquidity is a likely reason
Bonds have recently proved prescient. Yields fall with slowing economies

Digging deeper inside the bond market points to a coming ‘W’-shaped rebound

Conclusion: by mid-2022, economies re-establish their pre-COVID trends


What Are The Bond Markets Really Saying About The Slowing World Economy?

<ul>
<li>Sharp pick-up in ‘safe’ asset demands</li>
<li>Global Liquidity peaked late-2020</li>
<li>World GDP growth looks likely to have peaked in May, with big drop in China</li>
<li>June FOMC appears to justify tapering, which de facto has begun</li>
<li>Yield curves now flattening</li>
</ul>


Sharp pick-up in ‘safe’ asset demands
Global Liquidity peaked late-2020
World GDP growth looks likely to have peaked in May, with big drop in China
June FOMC appears to justify tapering, which de facto has begun
Yield curves now flattening


Global Liquidity Support Has Shrunk … Risk Assets Looking Vulnerable

<ul>
<li>Daily economic surprise indexes warn of sharp Chinese economic slowdown</li>
<li>This aligns with falling rates across Chinese yield structure</li>
<li>Moves unrelated to accommodative PBoC monetary policy</li>
<li>Chinese yields could fall another 50-100bp which is bullish for US Treasuries</li>
</ul>


Daily economic surprise indexes warn of sharp Chinese economic slowdown
This aligns with falling rates across Chinese yield structure
Moves unrelated to accommodative PBoC monetary policy
Chinese yields could fall another 50-100bp which is bullish for US Treasuries


United States

The MSCI World Index is a free-float weighted equity index. It was developed with a base value of 100 as of December 31, 1969. MXWO includes developed world markets, and does not include emerging markets. MXWD includes both emerging and developed markets.

MSCI World Index (MXWO INDEX)

Is There A Bear Out There? Where Are We In The Global Investment Cycle?

Asset allocation should be shifted more defensively in anticipation of major headwinds from slowing Global Liquidity growth in 2022

Michael J. Howell

Bad News Is Closer Than You Think

Markets are too complacent to 'transitory' inflation risks and to the absence of Chinese stimulus. There is a risk of another 'liquidity crisis'...

Michael J. Howell

What Are The Bond Markets Really Saying About The Slowing World Economy?

Looking closely at the US term structure of interest rates strongly suggests an upcoming 'W'-shaped pattern in World economic activity. This may...

Michael J. Howell

Global Liquidity Support Has Shrunk … Risk Assets Looking Vulnerable

Falling Global Liquidity, notably in the US, and skidding World economic activity, notably in China, suggest that the climate for risk assets is...

Michael J. Howell

China's Economy: Chips Or Cracks?

Daily economic surprise indexes show sharply lower Chinese economic momentum in early June. This should lead to 50-100bp cuts in rates along the...

Michael J. Howell