The Sunday Drive - 04/05/2026 Edition [#209]
Musings and Meanderings of a Financial Provocateur
šš¼ Hello friends! Letās enjoy an Easter Sunday Drive around the internet.
Before we get started, Iād like to share a professional update.
Shortly after my retirement from Eaton Vance a little over four years ago, I launched the New Lantern Hedged Equity Fund, a privately offered fund available only to accredited investors. The fund is an equity-based alternative to fixed income allocations or equity allocations in need of de-risking.
Iām happy to announce that this past week, the fund celebrated its three year anniversary, an important milestone in the life of any investment vehicle. If youāre interested in learning more about the fundās strategy and performance, HERE is our most recent video.
Iām also excited to tell you that later this year, we plan to offer the strategy to a broader audience with the launch of our own ETF. More to comeā¦
Now letās start driving.
š¶ Vibin'
With all the goings on around the world, particularly in the Middle East, and the daily (hourly?) shifts in associated narratives, this week Iām vibinā to Sheryl Crowās Everyday is a Winding Road. Hang in thereā¦
š Ā Quote of the Weekā
āPessimists sound smart. Optimists make money.ā
ā Nat Friedman
š Ā Chart of the Week
The Tide That Moves Everything
I found this weekās Chart very thought provoking. It tracks the Global Liquidity Cycle for advanced economies going back to 1965. Sixty years of data. The pattern is interesting and shows a near-rhythmic 65-month wave, roughly 5 1/2 years from trough to trough, pulsing through markets like a heartbeat.
Understanding this cycle, Iād argue, is one of the most underappreciated edges that long-term investors can have.
Hereās the core idea: global liquidity: the aggregate availability of money and credit across central banks, commercial banks, and cross-border capital flows, doesnāt move randomly. It oscillates. And those oscillations have historically lined up remarkably well with the broad rhythm of risk asset performance.
When liquidity expands, financial assets generally flourish. When it contracts, not so much.
Think of it like the tide. You can have a beautiful beach, perfect weather, and a great boat, but if the tide is going out, youāre going to have a harder time than you expected.
Which brings me to where we are right now.
As the Chart shows, the current cycle likely peaked somewhere in Q4 2025 or early 2026. The absolute level of global liquidity remains enormous, some estimates put it near $188 trillion. But what matters most to markets is the rate of change, not the level. And the momentum is fading.
Several forces are converging. The Fed has ended quantitative tightening, but the ECB, Bank of England, and Bank of Japan are still shrinking their balance sheets. Chinaās PBOC has been injecting stimulus, providing a partial offset, but the net effect across advanced economies is a decelerating liquidity environment. Layered on top of that: trillions in global debt requiring refinancing over 2026ā2028, rising bond market volatility, and recently a firmer dollar, all of which tend to tighten financial conditions.
None of this means a crash is imminent. Liquidity cycles create headwinds, not cliffs. But it does argue for a more selective, risk-aware posture, particularly for portfolios that were positioned for the tailwind of an expanding cycle.
For investors approaching or already in retirement, this matters enormously. The sequence of returns risk that threatens retirement portfolios is often amplified at exactly these inflection points in the liquidity cycle.
The tide is going out. That doesnāt mean you canāt swim ā it just means you need to know where the rocks are.
Source: CrossBorder Capital.
š Interesting Drive-By's š
š¤ Financialization Has Corrupted the Financial Industry
š” Viktor is an AI Co-Worker For Your Entire Team
š How Japan Has Changed Over the Last 20 Years
š„ Ending the Quarter With a Bang
š° Kevin Warsh and a New Monetary Policy Regime
šš¼ Parting Thought
Happy Easter āļø
If you have any cool articles or ideas that might be interesting for future Sunday Drive-by's, please send them along or tweet 'em (X āem?) at me.
Please note that the content in The Sunday Drive is intended for informational purposes only, and is in no way intended to be financial, legal, tax, marital, or even cooking advice. Consult your own professionals as needed. The views expressed in The Sunday Drive are mine alone, and are not necessarily the views of Investment Research Partners.
āI hope you have a relaxing weekend and a great week ahead. See you next Sunday...
Your faithful financial provocateur,
-Mikeā
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