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>Dominance of retail investors in US equity market may explain disparity between data on investor positioning and more negative sentiment surveys</li>
<li>Households’ equity positions can be shown to be directly related to the US unemployment rate, and it reactive than anticipatory</li>
<li>With unemployment set to test 6% of workforce, equities will continue to sell-off. Yet, this looks like the final down-leg of this bear market</li>
</ul>


Dominance of retail investors in US equity market may explain disparity between data on investor positioning and more negative sentiment surveys
Households’ equity positions can be shown to be directly related to the US unemployment rate, and it reactive than anticipatory
With unemployment set to test 6% of workforce, equities will continue to sell-off. Yet, this looks like the final down-leg of this bear market


The Final Bear Phase: America’s Retail Investors Are Only Just Starting To Panic

<ul>
<li>Daily Liquidity has tanked lower, causing bond term premia to worryingly collapse to near all-time lows</li>
<li>S&amp;P500 (SPX) likely to test 3200 because of skidding Liquidity, but may even drop below 3000 as earnings get crushed.</li>
<li>Lower term premia are already set-in-stone and have  always led to much weaker reported corporate earnings some 15 months later. US S&amp;P500 earnings could skid by over 20% in 2023  </li>
</ul>


Daily Liquidity has tanked lower, causing bond term premia to worryingly collapse to near all-time lows
S&amp;P500 (SPX) likely to test 3200 because of skidding Liquidity, but may even drop below 3000 as earnings get crushed.
Lower term premia are already set-in-stone and have  always led to much weaker reported corporate earnings some 15 months later. US S&amp;P500 earnings could skid by over 20% in 2023  


Icarus Is Falling! The Markets Are Breaking: More Volatility Is Coming

<ul>
<li>The post-Jackson Hole period has seen renewed tightening policies by the World's major Central Banks, led by the US Fed</li>
<li>World Central Bank Liquidity is skidding at an annualised clip of minus 30%. This squeeze is coinciding with weakening corporate profits</li>
<li>Risk asset markets (eg SPX) typically lag liquidity by several months. They have two legs down, often separated by a brief rally of circa 20%. The second leg-down measures 15-20%</li>
</ul>


The post-Jackson Hole period has seen renewed tightening policies by the World's major Central Banks, led by the US Fed
World Central Bank Liquidity is skidding at an annualised clip of minus 30%. This squeeze is coinciding with weakening corporate profits
Risk asset markets (eg SPX) typically lag liquidity by several months. They have two legs down, often separated by a brief rally of circa 20%. The second leg-down measures 15-20%


Second Leg Down: 5% Points More on Fed Funds! Central Banks Turn Up the Heat

<ul>
<li>Chairman Powell’s short and direct Jackson Hole speech emphasized the need to conquer inflation and (unusually) warned us to expect some economic pain</li>
<li>US monetary tightening is being front-end loaded. The Fed sees QT/QE operating like an ‘air conditioning unit’ whirring in the background. But we see QT as a wrecking ball
</li>
<li>Too much liquidity is being sucked out of financial markets by Central Banks. Among other things it may trigger Euro instability? Will this force a policy pivot sometime in 2023?</li>
</ul>


Chairman Powell’s short and direct Jackson Hole speech emphasized the need to conquer inflation and (unusually) warned us to expect some economic pain
US monetary tightening is being front-end loaded. The Fed sees QT/QE operating like an ‘air conditioning unit’ whirring in the background. But we see QT as a wrecking ball

Too much liquidity is being sucked out of financial markets by Central Banks. Among other things it may trigger Euro instability? Will this force a policy pivot sometime in 2023?


Post-Jackson Hole: Don’t Fight The Fed… Euro Collapse Threatened?

<ul>
<li>Fed unlikely to ease policy rates quickly. Even with recession and rates on ‘hold’, QT (quantitative tightening) policy will probably continue</li>
<li>US dollar liquidity already skidding badly. QT could reduce Fed Balance Sheet by one-third</li>
<li>QT has highly non-linear effects on financial stability. A crisis could be brewing?</li>
</ul>


Fed unlikely to ease policy rates quickly. Even with recession and rates on ‘hold’, QT (quantitative tightening) policy will probably continue
US dollar liquidity already skidding badly. QT could reduce Fed Balance Sheet by one-third
QT has highly non-linear effects on financial stability. A crisis could be brewing?


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)

The Final Bear Phase: America’s Retail Investors Are Only Just Starting To Panic

Dominance of retail investors in US equity market is related to the US unemployment rate. With this set to test 6%, equities will continue to sell...

Michael J. Howell

Icarus Is Falling! The Markets Are Breaking: More Volatility Is Coming

Higher forex volatility and higher bond volatility eventually pass through into higher equity volatility. Second leg-down in this bear market is...

Michael J. Howell

Second Leg Down: 5% Points More on Fed Funds! Central Banks Turn Up the Heat

post-Jackson Hole the World's Central Banks have stepped-up tightening. Liquidity is skidding at an annualized 30% clip. QT policies in the US add...

Michael J. Howell

Post-Jackson Hole: Don’t Fight The Fed… Euro Collapse Threatened?

Post-Jackson Hole, US policy is front-ended loaded. Fed B/S reduction or QT is asymmetric and non-linear in its effects. It will cause funding...

Michael J. Howell

Major Fed Policy Error Ahead!?

Fed’s upcoming Jackson Hole may ignore the bigger threat to financial stability from persistent and potentially accelerating QT. We remain risk-off...

Michael J. Howell