Global Liquidity Is Shifting—Here’s What It Means for Markets

The dollar’s grip on liquidity is loosening, and key indicators point to a changing landscape. Are you positioned for what comes next?

Right now, global liquidity is trending lower—that’s the reality. But what really matters is where it’s headed next.

Key leading indicators are signaling a modest increase over the medium term. It’s not a flood of liquidity yet, but it’s a shift worth watching.

If liquidity starts expanding, risk assets will respond—they always do.

The question is how long until the market catches on?

A modest increase in global liquidity could be just what’s needed to sustain the current risk on market regime.

It reminds me of this song…

Right now, the Treasury Department has no net borrowing capacity, and there’s $800B sitting in the TGA, ready to be spent.

That’s a strong backdrop for U.S. liquidity.

Sure, we’re watching for a potential global refinancing air pocket this summer. But for now?

Markets can keep grinding higher over the next 1-2 quarters as U.S. and global liquidity conditions modestly improve.

This is a bullish development.

Right now the dollar is the biggest catalyst for liquidity. A strong dollar was putting pressure on the broad money supply.

Now we are seeing a massive wick which could lead to a reversal in the dollar if it gets below the blue zone.

What has been easing the pressure from the dollar: China is easing monetary policy, while major currency blocs like the U.S., Eurozone, and China are all expanding their broad money supply, pushing back toward all-time highs.

That’s bullish for liquidity, but it’s not all smooth sailing.

Chart of Global M2 money supply.

Global liquidity is inching higher, but there are still some uncertainties ahead.

The Dollar Trade Is Changing—Are You Ready?

If the dollar is going to fall, these currencies are about to rip higher.

Here’s the thing—when something’s been happening for a while, people assume it’ll keep happening forever. The dollar’s been strong, so it’ll always be strong… right?

We’ll talk more about that tomorrow.

But if you want to catch big money in the big swings, you have to understand that the future could look very different from the recent past.

• Everyone thought gold was dead after its monster run in the ‘70s.

• Everyone thought cocoa was done before it exploded.

• Everyone thought bond yields would never move higher—until they did.

Markets are cyclical when you zoom out. Asset classes rotate. The question is: Are you positioned for what comes next?

Against All Odds Research

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