2026 outlook: how global liquidity shifts will redefine risk assets and investment strategies

As 2026 begins, Crossborder Capital founder Michael Howell’s latest global liquidity update frames the year as a test of how monetary flows, rather than fundamentals alone, will shape asset prices. Howell’s central contention, carried in a recent note and amplified across interviews and podcasts, is straightforward: the past decade’s asset rallies , including the surge in artificial intelligence plays and cryptocurrencies , have been fuelled by abundant monetary accommodation, and a downturn in global liquidity could now unsettle risk assets.

According to Howell’s analysis published on Roger Montgomery’s site, monetary inflation has become the “new normal”. Governments and central banks, he argues, are effectively lending money into existence to cover fiscal shortfalls; that process keeps asset markets elevated. Howell asserts this is measurable: weekly changes in his Global Liquidity series have correlated strongly with returns across asset classes since 2016, with crypto showing the greatest sensitivity. Liquidity, he notes, leads Bitcoin by roughly 13 weeks and, in his view, supersedes narratives such as the Bitcoin halving cycle in explaining demand.

That thesis sits beside a consistent advisory: hold monetary hedges. Howell recommends gold and selected cryptocurrencies as portfolio protections against persistent monetisation. He qualifies this with timing: these are positions to “buy on dips”, with tactical buys at c.20–25% below trend, while maintaining a longer-term hedge allocation.

But Howell’s 2026 outlook is not monosyllabic optimism. He sketches four converging pressures for the year: slowing global liquidity, cautious investor positioning, an accelerating real-world economy and diverging U.S.-China liquidity paths. In that configuration, a stronger real economy can draw funds out of financial markets into production, an effect he sees as historically recurring and captured in negative correlations between global liquidity and world business activity. Howell therefore anticipates a liquidity downswing that will favour cash and long-dated government bonds over speculative equities, flatten yield curves and widen credit spreads.

Other coverage amplifies and nuances those warnings. BusinessUpturn reported Howell’s view that the global liquidity cycle is entering a sharp contraction, raising the prospect of a multi-year equity downturn. Benzinga cited his estimate that roughly $40 trillion of debt across governments, corporations and households will need refinancing, a structural stress that could coincide with a liquidity peak in early 2026. DailyHodl and CoinCapital have highlighted Howell’s caution even as the Federal Reserve halts quantitative tightening; he describes the planned modest Treasury purchases as “not QE QE” and warns they may leave bank reserves materially short of what markets require.

Not all market commentators see a uniform squeeze. AInvest contends that liquidity normalisation alongside aggressive fiscal expansion in major economies is reshaping allocations toward high-quality equities, real assets and gold, and argues the dual dynamic of easing central bank restraint plus fiscal stimulus can be constructive for selected risk assets. The Indian Sun reported Howell’s earlier observation that liquidity flows had recently favoured emerging Asia, where stabilising growth, particularly in China, was prompting rebalancing away from US assets. Howell himself cautioned that such advantages may be finite if liquidity peaks as he expects.

Practically, Howell translates his cycle analysis into an allocation roadmap: reduce credit exposure and “top-slice” speculative equities, increase commodities and cash, consider long bonds, and favour energy and resources over technology. He also warns that downswings raise default risks and that investors should expect sector rotations from cyclical growth to defensive value. Roger Montgomery’s commentary on Howell’s note echoes this, urging diversification into strategies with low public-market exposure where appropriate.

There are caveats. Howell does not predict systemic collapse; rather, he frames 2026 as a year of heightened risk for speculative assets even as monetary inflation remains a persistent backdrop that can quicken recoveries. Market outcomes will hinge on sequencing: how fast fiscal deficits are monetised, the scale of central-bank and Treasury operations, and whether geopolitical or policy shocks force deviations from current trajectories.

For investors the takeaway is tactical and structural. Howell’s liquidity lens suggests keeping liquidity risk front of mind, retaining allocations to monetary hedges and preparing for tightening credit conditions, while also remaining ready to redeploy capital if and when monetary backstops return. According to Howell’s work, Bitcoin will continue to behave as a “systematic barometer” of liquidity, gold will retain its role as a traditional store of value, and real assets may offer durable protection in a world where governments increasingly view monetisation as an ongoing tool.

Disclosure: Montgomery’s note includes references to its own investment products and contact points for Montgomery Investment Management. The commentary above integrates Howell’s published Global Liquidity analysis and reporting from The Indian Sun, AInvest, BusinessUpturn, Benzinga, DailyHodl and CoinCapital; it aims to reflect the range of perspectives on how liquidity dynamics may shape markets through 2026.