So? Liverpool didn't have a special squad last season and the changes that have been made haven't changed anything. If City were "okay" then it's unlikely Liverpool would have won the title, so why should they be favourites for the Champions League when there are obviously two full-fledged teams - PSG and Real? And several potentially good others? This is a typical projection of one successful season onto the next, given that the success only happened because City went down, I find it dubious.
So I think this is just a beginning for Liverpool. I expect more players to come to get even stronger. Like selling Nunez and filling his place with a much better striker - I hope they do so.
And of course, it's a projection by bookies. Normally I'd say "My favourite is Real Madrid." but I'm not for now. I'd like to watch Xabi Alonso football there more to decide on it. For now PSG are the best team - referring to their last CL performance.