Michael Howell: Market turbulence is approaching but not here yet, media narratives on recession are misleading, and understanding liquidity cycles is key for investors | Forward Guidance

Market turbulence looms as liquidity cycles, not recession fears, shape the future of risk assets.

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Add us on Google by Editorial Team Apr. 22, 2026

Key Takeaways

• The market is heading towards a turbulent phase for risk assets, but it has not arrived yet.
• Media narratives about a looming deep recession do not match current market data.
• Yield curves are expected to flatten due to declining liquidity, opposing the consensus of steepening.
• The real economy’s demand for working capital is pulling liquidity out of markets, affecting yield curves.
• There are two main cycles in the economy: the business cycle and the liquidity cycle, which influence each other.
• Financial markets have a significant impact on economic outcomes, with money moving markets and economies following.
• Global liquidity is crucial for debt refinancing and is defined by the capacity of credit providers.
• The real economy typically lags behind the liquidity cycle by 15 to 20 months.
• Financial assets can predict the business cycle by reflecting investor sentiment changes before economic peaks and troughs.
• Current economic data and market behavior do not support the narrative of an impending deep recession.
• Liquidity cycles are a key driver of market movements and should be a focus for investors.
• Understanding the timing relationship between liquidity cycles and economic performance is essential for forecasting.

Guest intro

Michael Howell is the founder and managing director of CrossBorder Capital, a leading research firm specializing in global liquidity indicators. He pioneered the liquidity cycle framework, which analyzes central bank policies, cross-border flows, and private sector financing to forecast market turning points. His insights challenge consensus views on economic cycles and risk assets.

The market’s trajectory and liquidity cycles

• We are moving towards a turbulent phase for risk assets, but we are not there yet.

  — Michael Howell

• Liquidity cycles are a primary driver of market movements and should be closely monitored.

• Although we’re not in turbulence yet, we’re basically moving in that direction.

  — Michael Howell

• Understanding liquidity cycles can help predict market behavior and economic trends.
• The current state of the liquidity cycle suggests caution for risk asset investors.
• Liquidity cycles influence both market movements and economic activity.

• The liquidity cycle which dominates market movements is basically inflecting lower.

  — Michael Howell

• Investors should consider liquidity cycles when assessing market risks and opportunities.

Challenging media narratives on recession

• The media’s portrayal of an impending deep recession does not align with the actual market data.

  — Michael Howell

• Current economic indicators do not support the narrative of a deep recession.

• You look at the data, you look at what the markets are doing, it doesn’t seem to be the case.

  — Michael Howell

• Data-driven analysis is crucial for understanding economic trends and avoiding misinformation.
• Media narratives can often exaggerate economic risks without supporting data.
• Investors should rely on market data rather than media reports for economic forecasting.

• The closure of the straightforward moves is gonna lead to the world economy sort of tanking into deep recession… it doesn’t seem to be the case, does it?

  — Michael Howell

• A more optimistic view of the economy is supported by current data and market behavior.

Yield curves and liquidity

• Yield curves are likely to flatten due to a decrease in liquidity, contrary to the consensus expectation of steepening.

  — Michael Howell

• Declining liquidity is a key factor in the flattening of yield curves.

• The markets are more powerful, and what you’re likely to see is a flattening curve because liquidity is inflecting lower.

  — Michael Howell

• The real economy’s demand for working capital is affecting liquidity and yield curves.

• It’s because the real economy is actually accelerating or increasing its appetite to be more correct, it’s working capital demands.

  — Michael Howell

• Understanding the role of liquidity in yield curve movements is essential for investors.
• Central banks are not the primary drivers of liquidity changes affecting yield curves.

• The reason for that is not because central banks are tightening and withdrawing liquidity.

  — Michael Howell

The interplay of business and liquidity cycles

• There are two distinct cycles in the economy: the business cycle and the liquidity cycle, which influence each other.

  — Michael Howell

• The liquidity cycle can impact the business cycle and vice versa.

• There is the economic or business cycle and then there’s the liquidity cycle which you focus on.

  — Michael Howell

• Understanding both cycles is crucial for analyzing economic conditions and market behavior.
• The interaction between these cycles can provide insights into future economic trends.
• Investors should consider both business and liquidity cycles in their strategies.
• The liquidity cycle often leads the business cycle, influencing economic activity.

• Money moves markets, and economies are downstream of markets.

  — Michael Howell

The significance of global liquidity

• Global liquidity is defined as the financial capacity of credit providers, which is crucial for debt refinancing in financial markets.

  — Michael Howell

• Global liquidity plays a vital role in financial markets and economic stability.

• It’s a measure of the financial capacity or the balance sheet capacity of credit providers.

  — Michael Howell

• Understanding global liquidity is essential for assessing market risks and opportunities.
• The real economy lags the liquidity cycle by about 15 to 20 months.

• The real economy tends to lag the liquidity cycle by about fifteen to twenty months.

  — Michael Howell

• Monitoring global liquidity trends can provide insights into future economic conditions.
• Investors should consider global liquidity when making financial decisions.

Financial assets as predictors of the business cycle

• Financial assets are good predictors of the business cycle due to the relationship between investor mood and economic peaks and troughs.

  — Michael Howell

• Investor sentiment changes can signal upcoming economic shifts.

• Investors’ mood sours just before a peak and picks up just before a trough.

  — Michael Howell

• Financial markets can provide early warnings of economic changes.
• Understanding the link between financial assets and the business cycle is valuable for forecasting.
• Investors should pay attention to market sentiment as an indicator of economic conditions.
• Financial assets can offer insights into future economic trends and cycles.
• Monitoring investor sentiment can help predict business cycle movements.

Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.