During the recent Global Liquidity Investment Forums held in Shanghai and Beijing, our portfolio managers Aidan Shevlin, Doris Grillo, and Molly Meng shared perspectives on money markets across the world, with a focus on volatility management, rate-path repricing, and policy signal interpretation.
U.S.: resilient growth, energy sensitivity, and a Fed biased to “wait-and-see”
U.S. economic fundamentals remain resilient even as the macro-outlook becomes more conditional: Growth is likely to hold positive around the long-term trend, while the key swing factor is how long energy prices remain elevated. If the energy shock persists, the likely outcome shifts toward below-trend growth, with AI-related capex and other supports acting as partial offsets rather than full insulation.
Inflation risks are best understood via transmission channels: the U.S. position as a net exporter of crude oil makes the impulse more indirect than for energy importers. Nevertheless, prolonged elevated oil prices can still weigh on growth and sentiment, while lifting inflation over time.
For monetary policy, the practical takeaway is to separate market repricing from the reaction function. Even when market pricing swings towards more extreme outcomes, the Fed posture leans to “wait-and-see,” with actions (if any) likely to be incremental as the data clarifies second-round effects. In a liquidity context, this implies front-end volatility can remain meaningful even without frequent policy moves – making reinvestment planning and liquidity buffers central.
APAC and EMEA: geopolitics vs. the AI investment boom, and diverging policy outcomes
Across APAC and EMEA, 2026 has been dominated by two forces, geopolitics (uncertainty higher, oil prices higher, supply tighter) and the AI investment boom. The former suppresses spending and investment; the latter has supported parts of Asia via supply-chain transmission into hardware demand.
For central banks, this mix is uncomfortable, forcing a difficult trade-off – vigilant on inflation while wary of tightening into slowing growth – raising the risk of policy mistakes in either direction. Most central banks are opting for caution, but the policy starting point also matters. Economies entering the shock with more restrictive policy (UK) have more scope to wait and see; while those with neutral or accommodative settings (ECB and RBA) face sharper credibility trade-offs. In any case, the direction is clear – the interest rate cutting cycle is over and if inflation accelerates the next move may be hikes.
Credit and liquidity: solid fundamentals, but thinner cushions when valuations are tight
When fundamentals are solid, technicals can still matter – and valuation often sets the margin for error. High-grade issuer fundamentals were characterized as solid, with resilient absorption of investment-grade supply supported by earlier spread widening.
At the same time, tight spreads compress the cushion against adverse sentiment. Even if absolute yields remain attractive, tighter credit valuations make selectivity and downside planning more important for liquidity portfolios.
China: lower rates, “sticky” carry, and signal-reading
In China, lower money market rates have been the primary driver of lower money market fund yields. A practical portfolio implication is the role of duration: managing duration can create yield “stickiness” versus very short tenor deposits, smoothing repricing as higher-yielding assets roll off over time.
Operationally, policy interpretation benefits from precision: thorough reading of central bank announcement can translate communication into expectations for liquidity conditions. For example, separating demand-driven shifts in open-market operations from a tightening change in stance. The baseline view remained broadly “moderately loose”, with relatively low odds of near-term rate cuts given external uncertainty and inflation constraints.
Conclusion: resilience over precision in a re-pricing world
Across regions and markets, the through-line is data-dependent policy under elevated uncertainty – where both rates and spreads can reprice quickly, and the cost of being wrong rises when cushions are thin. In this environment, liquidity decision-making tends to reward resilience: maintaining buffers, pacing reinvestment, and staying disciplined on valuation rather than anchoring to a single forecast path.