This episode explores the cyclical nature of credit markets and the implications for global liquidity and asset markets in 2025. Host Erik Townsend interviews Michael Howell, CEO of Cross Border Capital, who argues that credit markets function more as a refinancing system than a credit origination system, driven by the market's need to lend rather than the borrower's ability to repay. Against this backdrop, Howell presents a unique perspective on liquidity cycles, emphasizing the importance of balance sheet analysis and flows of liquidity. More significantly, the discussion pivots to the impact of President Trump's trade policies on these cycles, suggesting potential disruptions to the normal five-to-six-year debt refinancing cycle. For instance, Howell highlights the significant risk-off move by US investors since December 2024, impacting risk asset allocation. In contrast to the textbook approach, Howell's analysis emphasizes the interplay between global liquidity, debt refinancing, and investor behavior, predicting potential challenges in 2025 due to factors like the debt maturity wall and uncertainty surrounding central bank policies. This analysis has significant implications for investors, particularly concerning asset allocation strategies in a potentially volatile market environment.
