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With a liquidity crisis looming, investors must switch their thinking

A shorter-term mindset is needed to cope with market stress and seize opportunities to buy cheap assets
Liquidity risks and opportunities arrive quickly and are shortlived, as the banking crisis of March so aptly demonstrated
The writer is global chief investment officer at State Street Global Advisors

A potential liquidity crisis is looming over financial markets. To prepare, investors must change how they think about liquidity in their portfolios. The past will not be a guide.

There are three reasons driving our concern. First, the macroeconomic environment has shifted profoundly, moving from the quantitative easing stimulus programmes of central banks to tightening on a co-ordinated basis.

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