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The global liquidity cycle
Global liquidity doesn’t rise in a straight line. It moves in waves of expansion and contraction, and turning points in its momentum have often mattered more to markets than its level.
Waves, not a line
Liquidity expands when central banks ease, governments borrow and credit is easy, and contracts when they tighten. Some analysts describe a cycle of roughly five to six years from trough to trough; the length varies a lot and is debated. Recent examples: a contraction in 2018 and 2019, a surge in 2020 and 2021, a sharp fall in dollar terms in 2022, and a recovery from late 2022.
Why momentum matters
The level of liquidity is huge and slow-moving. What changes the picture for markets is whether it’s speeding up or slowing down. That’s why we track the 13-week change in the Global Liquidity Index: when it turns from rising to falling, or back, the backdrop for risk assets changes.
Where we are now
The Global Liquidity Index is US$194.85 trillion (week to 2 November 2026): up 0.40% over 4 weeks and up 5.1% on a year earlier. Pro members get an email whenever its 13-week momentum turns, and a weekly note on what’s driving it.
Other signs of the cycle
- Whether markets expect rates to fall or rise: the SOFR minus 2-year spread.
- The yield curve and financial conditions.
- Central bank balance sheets: the Fed and, in Pro, the ECB, BoJ, PBoC and BoE.
Questions
How long is the global liquidity cycle?
There’s no fixed length. Some analysts describe cycles of roughly five to six years, but timing varies with policy and crises, so it isn’t a clock.
What is liquidity momentum?
The rate of change of liquidity, here the 13-week change in the Global Liquidity Index. Turning points in momentum have often mattered more to markets than the level.
Related
Follow it every week. The Global Liquidity Index is free. Pro adds 112 charts behind it, a weekly note on what’s driving it and an email when its momentum turns. Free for 10 days.
Global Liquidity Index Start free trialGeneral information only, not financial advice. Data can be delayed, revised or wrong. Sources and credits.