The global money flow is shifting fast — find out how it’s influencing your investment decisions.
Lately, I’ve been keeping a close eye on global liquidity, and 2024 has been a year where it’s surging fast.
With central banks cutting interest rates and pumping money into the economy, there’s a significant impact on asset prices.
Global Liquidity Index (2000–2026)
I’ve realized that while there are big opportunities, this also comes with risks like inflation and economic instability. So, I thought I’d share what I’ve been learning and how I’ll be adjusting my strategy.
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Quick Summary:
Rising global liquidity is driving up prices across bonds, stocks, and cryptocurrencies.
Bitcoin is closely tied to liquidity and is benefiting from the current surge.
Inflation and economic instability are real risks to watch out for.
Diversification is key — balancing safe assets with riskier ones
Investing beats saving in this high-liquidity, inflationary environment.
Why Global Liquidity Matters to Me (and Why It Should Matter to You, Too)
Let’s break it down — global liquidity is basically the total amount of money circulating in the economy. Think of it as cash, bank deposits, and other liquid assets floating around, making their way through various channels.
Central banks play a massive role in this by tweaking interest rates or adding stimulus, which makes borrowing cheaper and increases the amount of money available.
This year, some major moves have really caught my attention:
China has rolled out a $143 billion stimulus package to boost its economy.
The U.S. Federal Reserve cut interest rates by 50 basis points in September 2024, and there’s chatter about even more cuts to come.
So, what does this mean for people like you and me who are trying to make smart investment decisions? Well, more liquidity usually means higher asset prices.
And that’s where the fun begins.
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How Rising Liquidity Is Impacting My Investments
With the surge in global liquidity, 2024 is bringing some big shifts in the financial world. Central banks are flooding economies with cheap money, and it’s sending waves through various asset classes.
For someone like me who’s always looking to make the most of market changes, this creates both opportunities and risks.
Here’s how I’m seeing it:
Traditional Investments
Increased liquidity often makes safer investments like bonds and real estate more attractive. Investors (myself included!) tend to park cash in these stable assets during uncertain times. The more capital that flows in, the more demand — and that’s driving prices up.
Stocks
Once bonds and real estate heat up, stocks come into play. With all that extra liquidity, investor confidence gets a boost, and that’s when I start eyeing higher returns in the stock market.
Companies find it easier to borrow money and expand, which drives up stock prices. Right now, I’m paying close attention to sectors that thrive in this environment — tech and financials are my go-tos.
Directional Alignment with Global Liquidity in 12-months Period
Cryptocurrencies
Now, here’s where things get really interesting.
Bitcoin is highly sensitive to global liquidity — there’s a whopping 0.94 correlation between Bitcoin prices and global liquidity from 2013 to 2024. Since the Fed cut rates in September, I’ve seen a noticeable uptick in crypto prices, and that’s not a coincidence.
For me, Bitcoin is like a barometer for how much money is floating around in the global economy. So, I’ve been increasing my exposure to Bitcoin and other cryptos, expecting their prices to continue rising as liquidity swells.
BTC vs. global M2 supply correlation chart
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What’s on My Radar?
But it’s not all roses. Along with rising liquidity comes inflation. More money in the system often leads to higher prices for goods and services, eroding the value of cash. One area I’m keeping a close eye on is the U.S. housing market.
Global Net Liquidity
The income needed to afford an average home has more than doubled since 2020, from $53,679 to $121,398 in 2024. Ouch.
I’m also being cautious about the risk of asset bubbles and economic stagnation. Experts like Daniel Lacalle warn that while liquidity can boost asset prices, it can also create unsustainable levels of growth.
I’m making sure not to get too aggressive with risky assets in this environment.
Now, How should we prepare for the Future?
Given the current landscape, it’s all about being strategic with your investments. Here’s what I’m focusing on, and what you might want to consider too:
Diversifying my portfolio
Don’t put all your eggs in one basket. I’m balancing safer bets like bonds and real estate with riskier options like stocks and cryptocurrencies.
Monitoring liquidity trends
I’m staying updated on what central banks are doing and how global liquidity is moving. This gives me a better sense of where to invest and when to make moves.
Factoring in inflation
Inflation isn’t something we can ignore — it’s eroding cash. That’s why I’m leaning toward assets that have the potential to outpace inflation, like real estate and Bitcoin. The goal here is to protect purchasing power and grow capital in the long run.
Choosing to invest over saving
One of the most important lessons I’ve learned this year is the importance of investing over saving. In this environment, savers could see their money lose value over time due to inflation, while investors stand to gain as asset prices rise.
For me, the question is clear: “Did I invest or did I save?”
Wrapping Up
With global liquidity surging, we’re looking at both opportunities and risks. Asset prices are moving up across the board — from bonds to stocks, and even cryptocurrencies like Bitcoin. But let’s be real, these opportunities come with challenges: inflation and the potential for bubbles are lurking.
If you want to stay ahead, diversification is key. Spread your bets, don’t overexpose yourself to any one asset. Keep a close eye on liquidity trends, central bank moves, and be ready to adjust your positions quickly. The strategy here is to stay informed, adapt, and capitalize on the upswing while protecting yourself from the inevitable dips.
Bottom line: Stay smart, stay nimble. The opportunities are there, but only if you manage the risks.
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