Global Liquidity Watch: Weekly Update

Global Liquidity hits US$171.3tr - a new record high!

Global liquidity has hit a record US$171.3tr. To put into context, the 2023 average was US$166.6tr and the cycle-low in October 2022 was US$158.8tr. Still, liquidity levels are just 8% above that low.

The liquidity cycle typically lasts 5-6 years from trough-to-trough and we are some 15 months into the current upturn. On this basis, we expect liquidity levels to rise through this year and next before peaking late on in 2025.

Source: CrossBorder Capital, US Federal Reserve, People’s Bank of China, ECB, Bank of Japan, Bank of England

The chart below plots weekly Global Liquidity growth derived from Central Bank balance sheet data. Global liquidity is expanding at a strong 14% 3m annualized clip. Admittedly, Central Bank liquidity growth – and hence ‘the Shadow Monetary Base’ – has slowed a tad. This is down to the US Federal Reserve (Fed). Added to this, Fed Chair Powell’s comments on the outlook for Fed funds rates has caused US bond markets and hence collateral values to wobble. Despite these setbacks, liquidity continues to trend higher.