Global liquidity is expanding. Real rates are declining. The dollar is weakening. These three conditions historically define the most favourable macro regime for risk assets and commodities. We examine the current regime and its implications.
The global macro regime entering Q3 2026 is characterised by three concurrent conditions: expanding global liquidity, declining real interest rates and a weakening US dollar. Historically, this combination has been the most favourable environment for risk assets, commodities and emerging market equities.
Global M2 money supply has expanded by 8% year-on-year, driven by coordinated monetary easing across the Federal Reserve, European Central Bank and Bank of Japan. The Fed's rate cut cycle, which began in September 2024, has now delivered 200 basis points of easing, with real rates moving from +2.5% to +0.5%.
The dollar index (DXY) has declined 12% from its 2022 peak, reflecting both the rate differential compression and growing concerns about US fiscal sustainability. A weaker dollar is structurally positive for commodities priced in dollars and for emerging market assets.
The primary risk to this regime is a re-acceleration of US inflation, which would force the Federal Reserve to pause or reverse its easing cycle. We assign a 25% probability to this scenario, driven primarily by energy price volatility and persistent services inflation.
Research Disclaimer: This article is intended solely for informational, educational and research purposes. Nothing in this article constitutes investment advice or a recommendation to buy or sell any security. BGAM™ scores, scenarios and classifications are model-based analytical assessments for illustrative purposes only.
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