Gold and Bitcoin Seen as Key Hedges by Market Expert as Global Liquidity Dries Up
News Summary
Veteran strategist Michael Howell warns that global liquidity is entering a decisive contraction phase, signaling a potential multi-year downturn in US equities. He forecasts a stock market correction as liquidity withdrawals ripple through markets and anticipates a return to quantitative easing (QE) by 2026 to manage the refinancing of approximately $70 trillion of the estimated $350 trillion global debt annually. Against this backdrop, Howell identifies gold and Bitcoin as key hedging assets, expecting governments to resort to money printing and currency debasement. Howell's research indicates that global liquidity cycles typically span about five and a half years, placing financial markets late in the current cycle which began in 2020. He notes rising tensions in repo markets, reminiscent of 2019, as an early warning of tightening liquidity. He suggests the S&P 500 reacts to liquidity shifts with a six-month lag. During late-cycle liquidity contraction, Howell expects commodities and mining shares to outperform as investors rotate into real assets and inflation hedges. He projects gold could reach $10,000 per ounce by the mid-2030s, supported by long-term inflation and expanding global money supply, viewing Bitcoin as a complementary hedge despite its recent drop. Howell also suggests that ahead of upcoming US midterm elections, the Trump administration may favor household-level stimulus over direct financial market support.
Background
Global liquidity refers to the total amount of capital available for investment and lending in world financial markets, with its cyclical fluctuations believed to profoundly influence asset price behavior. Currently (2025), markets are at a critical juncture, with global debt burdens estimated at $350 trillion, requiring approximately $70 trillion in refinancing annually. Under the leadership of President Donald Trump (re-elected in 2024), U.S. economic policy, when faced with liquidity tightening and market pressure, may lean towards direct consumer support through fiscal stimulus (such as potential household checks), rather than immediate financial market-friendly measures. This policy inclination suggests that governments, especially ahead of election cycles, may prioritize alleviating public economic strain, thereby influencing the monetary policy choices of the Federal Reserve and global central banks.
In-Depth AI Insights
What are the deeper implications of global liquidity tightening and the anticipated return of quantitative easing (QE) on the macroeconomy and investment landscape, particularly under the current Trump administration? - The Trump administration, driven by political considerations ahead of the 2026 U.S. midterm elections, may lean towards fiscal stimulus (such as $2,000 household checks) to support the economy. This could create complex interactions with Federal Reserve monetary policy, potentially leading to concurrent fiscal stimulus and liquidity tightening, which may reignite inflation expectations and push the Fed toward more aggressive QE to avert a wave of debt defaults. - This