Batten down the hatches and allocate defensively because global liquidity has peaked, argues veteran strategist

A MarketWatch piece argues that global liquidity has peaked, with veteran strategist Mike Howell warning that stronger nominal GDP growth is pulling financing out of markets and into the real economy. He expects higher interest rates, rising bond yields and greater market volatility, and advises investors to become more defensive by reducing credit exposure and avoiding long-duration bonds. The article also highlights his view that China is the key swing factor: if the People’s Bank of China expands liquidity, it could support global growth and lift commodity prices. Howell sees a constructive case for gold as an inflation hedge and suggests oil could rise sharply, citing an elevated gold-to-oil ratio that implies potentially much higher crude prices if the ratio normalizes. Overall, the market takeaway is a defensive cross-asset stance: pressure on bonds and credit, potential support for commodities, and continued strength in gold if liquidity concerns and inflation risks persist.