Liquidity Drain Threatens To Disrupt Markets In 2025 | Michael Howell
Likely creating a rockier ride for investors next year
This is an important one folks…
When today's guest was on this channel back in March, he explained that rising net liquidity was responsible for the surprisingly strong performance seen in both the economy & the financial markets over the past 2 years.
And he predicted that these net liquidity inflows would continue, leading to even higher asset prices ahead.
Well, here in the final quarter of 2024, things so far have played out according to his script.
So will the good times continue into 2025?
Maybe not, says Michael Howell, founder & CEO of Crossborder Capital.
He sees good chance the liquidity tide could start receding as debt re-financings suck capital from the system.
As a result, he thinks 2025 will be a MUCH bumpier ride for investors (and 2026 likely even worse).
For a detailed explanation of what to expect, click here or on the image below:
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Adam’s Notes: Michael Howell (recorded 10.15.24)
EXECUTIVE SUMMARY:
Michael Howell expects the markets to continue performing well in the near term (i.e. next few months), supported by ample liquidity in the system which can power asset prices upward until the end of 2024. However, this is seen as temporary, and investors should not assume that this favorable environment will persist far into the new year (2025).
Three major risks will challenge liquidity in 2025: rising inflation, China's economic slowdown, and the "maturity wall" (a large volume of corporate debt that needs refinancing). These factors are expected to combine by the end of 2025, putting significant pressure on liquidity. While 2025 may still see positive gains, these risks could start impacting markets by mid to late 2025 and could become critical by 2026.
Michael highlights the enormous global debt burden, estimated at $350 trillion. On average, $50 trillion of this debt must be rolled over annually, and this debt refinancing cycle is expected to intensify by 2026. The so-called "maturity wall" will absorb liquidity that otherwise would support asset markets, potentially causing financial stress as debt markets compete for limited resources.
Michael projects
