Is Global Liquidity Breaking Down?

Welcome to The Weekly!

Yes. Global liquidity is showing signs of deterioration. Whether this represents a transitory pullback or a trending breakdown depends on POTUS, his Department of War, and how much they care about the midterm and 2028 elections. 

Currently, China (4%) and the US (2%) are the only major liquidity-supplying economies expanding liquidity on a 3mo SAAR basis. Liquidity in the Eurozone, Japan, Switzerland, and UK is down -17%, -8%, -9%, and -13%, respectively, on a 3mo SAAR basis. This is why global liquidity is down -4% on a 3mo SAAR basis as well. Recall that the US dollar, currency volatility, bond market volatility, and energy are all countercyclical leading indicators of global liquidity per the 42 Macro Global Liquidity Proxy, and each is bullish from the perspective of our Volatility-Adjusted Momentum Signal (VAMS).

In short, we continue to believe that it is likely the longer the US-Israel-Iran war persists, the greater the reduction in liquidity—and decline in asset markets—investors will experience.

As always, members of our global investor community can trust that our institutional-grade risk management overlays—KISS and Dr. Mo—will help our portfolios navigate these emergent risks better than investors attempting to manage risk without systematic rules or relying on fundamental research alone.

In Case You Missed It

What Should Investors Do If Their Portfolio Is Down YTD?

Enjoy this clip from our December 5, 2025, monthly Macro Scouting Report webcast in which we unpack signals from two of the core elements of our macro risk management process – our proprietary Positioning Model and Macro Weather Model – alongside key fundamental signals from the inflation and liquidity cycles. 

These and other signals are why our global investor community entered 2026 with a non-consensus expectation of turbulence and violent factor rotations in asset markets.

Chart of the Week

As Predicted, Private Sector Wage Growth Is Demonstrably Underperforming Survey-Based Measures Of Labor Market Slack

Private sector wage growth is continuing to underperform traditional survey-based measures of labor market tightness. While indicators such as small business hiring difficulty and the share of firms reporting few qualified applicants remain elevated, realized wage growth has been trending lower.

Successful Signals From Dr. Mo

On December 17th, 2025, our Discretionary Risk Management Overlay signaled a bearish breakdown in Business Development Companies (purveyors of private credit) $BIZD.

Since the pivot, $BIZD has depreciated 15%.

Community Spotlight

This week, we’re excited to share feedback from a member of our global investor community. Specifically, the spectacular performance 42 Macro clients experience, thanks to our KISS and Dr. Mo signals.

It’s always rewarding to see KISS and Dr. Mo deliver meaningful outcomes for investors around the world. We truly appreciate your feedback.