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Dear Investors,

The whole world saw the same headline I did last night. VOO is the first ETF in history to cross $1 trillion.

And the whole world celebrated the wrong number.

Within an hour my phone was a fireworks display - rocket emojis, screenshots, two people sending me the same chart captioned “the machine that can’t be stopped.” For the length of a coffee, I let myself enjoy it too.

Then I did what I always do when a number gets this loud. I printed the charts, cleared the desk, and laid them out in the order they had reached me.

The $1 trillion print isn’t the story. It’s the symptom. The real story was hiding 3 charts deeper - in a single line on a swaps curve that almost nobody is watching, a number that has quietly flipped from cuts to hikes while everyone stared at the fireworks.

The last 2 times the market moved the way it’s moving right now? One of them was a recovery. The other was weeks before the worst day in stock-market history.

I’m not going to tell you which one we’re in. I’m going to show you - with the receipts. What stocks, bonds and currencies actually did the last time the picture looked exactly like this.

Because opinions are cheap. And the only memory the market truly respects is the memory of price.

💰 The first trillion-dollar fund - and who really built it

VOO has pulled in +$69 billion of fresh money in 2026 already, on pace for its largest annual haul since the fund was born in 2010.

And that follows +$118 billion in 2024 and +$138 billion in 2025. Since the 2022 bear-market bottom, this single fund’s assets have more than tripled.

Its rivals haven’t withered - IVV now sits near $860 billion, SPY near $785 billion - but VOO broke the tape first.

Zoom out, and the scale is hard to hold in your head. Global ETF assets reached $21.9 trillion by the end of April, more than 3 times the $6.4 trillion of early 2020, after an unbroken 83 consecutive months of inflows.

A trillion-dollar index fund is not a vote of confidence in any company - it is a vote of confidence in the act of not choosing.

Every dollar that lands in VOO is spread across all 500 names by size, with no opinion about whether any of them is cheap or doomed. On the way up, that indifference is a gift. The trouble is that indifference cuts both ways.

So I reached back for the record, and it offered no comfort. Record inflow years have a cruel habit of arriving at the worst moment. The crowd poured money into equity funds at a record clip into the 2000 top, and again in 2021.

And what came next was not more of the same. In 2022 the S&P 500 fell -19.4% and the Nasdaq dropped -33%, its worst year since 2008.

The correlation is uncomfortable precisely because it is mechanical, not emotional: peak annual inflows move inversely to the following year’s returns.

The same plumbing that makes passive money a relentless, price-blind bid on the way up turns it into a relentless seller the instant flows reverse. The redemptions simply arrive, and the machine sells what it must, without sentiment.

That is how a melt-up quietly becomes an air pocket.

🌍 The owners of the market have quietly changed

The second chart explains the first, and it is the one that made me put the coffee down.

Foreign investors now hold a record $20 trillion of US stocks - about 19% of the market - a share that has nearly tripled since 2000.

Passive funds and ETFs hold $17 trillion, roughly 15%, triple their share since the 2008 crisis. And the group that paid for it? Active mutual funds, whose weight has more than halved to $11 trillion, around 10% - the lowest since the early 1990s.

The two fastest-growing owners of corporate America are foreigners and passive vehicles - the two groups least tethered to American fundamentals and to price discipline.

Foreign capital chases relative performance and a strong dollar. Passive capital chases nothing at all. And the one constituency that used to lean against excess - the active manager, paid to sell the overpriced and buy the forgotten - is shrinking out of relevance.

Here, history keeps its record in the currency, not the index. The foreign bid breathes through the dollar.

In 2022 the Dollar Index surged roughly +19% to around 114, a 20-year high - and that strength quietly masked the equity losses for overseas holders, who earned on the currency even as the stocks fell.

The danger is the reverse. When the dollar turns, a foreign investor….

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🥇 Lock my price for life

Dear Investors,

Let me tell you how this letter actually came together, because the process was more honest than the conclusion - and a good deal less triumphant than the number that prompted it.

When the Nasdaq 100 closed above 30,000 for the first time in its history, my phone did the thing it always does at moments like this. Champagne emojis.

By midnight I had 8 of them across 2 screens, and around the fifth I understood I’d had it backwards all evening.

The 30,000 print was not the story. It was the symptom.

The real story sat two and three charts deeper - in a pair of overnight rates almost nobody watches, in a humble bar chart of the money supply, in a line tracing the dollar across 55 years.

So I left the 8 charts in the exact order they’d arrived, because the order is itself part of the signal. Read out of sequence they look like 8 unrelated worries. Read in sequence they tell one uncomfortable story: a historic melt-up, floating on a tide of liquidity that is quietly debasing the very currency it is priced in.

And this time I’ve carried into every chart the memory of what equities, bonds and currencies actually did the last time the setup looked like this - because in our business, price memory is the only memory the market respects.

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Dear Investors,

The Macro Mornings Index is the fastest way to decode the market’s regime each week in real time.

As of [May24, 2026], it returned cumulatively [+9.3%] - and the Dashboard below explains the rotation underneath.

A simple output of a complex process: tracking regimes, liquidity, and cross-asset leadership so you don’t have to chase headlines.

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Disclosure

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Dear Investors,

I’m writing to you on Saturday morning, and I want to be honest with you before we start.

I have spent the last 72 hours rearranging eight charts on my desk, in different orders, with different colors of pen, and I cannot make them tell me a different story than the one I’m about to tell you. I tried. I genuinely tried.

I started Thursday afternoon thinking I was going to write you a measured letter about the May PPI print. By Friday at lunch I had to admit to myself that the PPI print was not the chart that mattered. There was a chart sitting underneath it that had already broken, quietly, and once I saw what had broken I could not unsee it.

Kevin Warsh was sworn in as Chair of the Federal Reserve on Friday. The 30-year Treasury auction the day before stopped at 5.046%, the first 5-handle on a long-bond auction since June 2007. The May PPI came in at +6.0% Y/Y, the hottest print in three years. And the S&P 500 earnings yield, sometime around the Tuesday close, slipped below the 10-year Treasury yield for the first time since June 2002.

Each of those facts would be remarkable in isolation. They are not in isolation, and that is the point of this letter.

They sit inside a cross-asset matrix that I have, in 15 years of doing this professionally, only one historical analog for. That analog rewrote the entire post-war investment playbook over the following nine years.

Read carefully. Take notes. Do not skim. I have written this letter for the PRO subscribers, and that means I’m going to ask more of you than I ask of the free list.

🎯 The Day Stocks Stopped Paying for Their Risk

Let me start with the chart that made me stop my Tuesday research call mid-sentence.

I had been talking to a hedge-fund client in Geneva about something else entirely. The conversation had drifted toward equity valuations, as these conversations always do. I pulled up the chart and just stopped.

The S&P 500 earnings yield is trading at roughly 3.7%. The 10-year Treasury is at 4.4%. That gives you an equity risk premium of negative 70bps. Negative.

Investors are now being paid less to own stocks than to own the risk-free asset, and the green arrow that runs across the bottom of that chart tells you this has not happened in 24 years.

The history is too clean to ignore.

In June 2002, the ERP touched zero with the S&P at 990. What followed was a 4-month drawdown of -23.4% that took the index to 776 by October. The 10-year yield collapsed 183bps, from 5.40% to 3.57%. Gold rallied from $321 to $367, a +14.2% gain. EUR/USD ran from 0.97 to 1.05, +8.6%. USD/JPY fell from 124 to 115, a 7.4% loss. Investment-grade credit spreads blew out from 195 to 287bps.

The Bloomberg US Aggregate, in those 4 months alone, returned +8.4%, the cleanest defensive bond rally of the entire decade.

The mid-2007 analog was more violent.

The S&P fell -57% peak to trough. Gold ran from $660 to $1,920 by August 2011, a gain of +191%. EUR/USD reached 1.59 in March 2008, a +17.8% rally. USD/JPY collapsed from 124 to 76 by October 2011, a 38.7% loss that destroyed every carry book on the Street. DXY fell 17.1% from 86 to 71. IG credit spreads blew from 96 to 618bps, a 6.4x repricing of corporate risk. And the 30-year Treasury rallied 200bps to deliver a +38% mark-to-market gain on the long bond.

The rolling 5-year correlation between the equity risk premium and forward 24-month real equity returns has been +0.74 since 1980. The correlation between an ERP at zero and forward 24-month gold returns has been +0.61.

In 40 years of monthly data, I cannot find a single instance where the ERP went negative and the forward 24-month real equity return was positive. Not one. The mean forward real return from negative-ERP starts is -14.6%, with a standard deviation of 11.2%.

That is a narrow distribution centered on losses, and that is the chart that made me stop my Geneva call.

🏛️ Warsh Inherits a War He Did Not Start

The next chart is the one Warsh has on his desk this weekend, whether he wants it there or not, and I’d be willing to bet a good bottle of something that he is not enjoying the view.

The March Dot Plot, the blue line that drops dramatically across the chart, shows the Fed communicating 2 cuts by September 2027. The path takes the funds rate from 3.625% today down to 3.125%.

The market, in green, says something different.

The OIS curve as of Wednesday’s close prices the funds rate at 3.855% by June 2027, 3.840% by August, and 3.810% by September. The market is pricing zero cuts and roughly one hike. The gap at the 18-month forward node is 73bps, the widest market-Fed disagreement since November 2007.

The last 3 times this gap got that wide, the cross-asset response was not subtle.

In November 2007, the Fed terminal projected 4.50% by end-2008 while the market priced 3.10%. The market won. The funds rate hit 0.25% by December 2008, 425bps below the Fed’s own forecast. The 2-year Treasury rallied 290bps for an 8.8% capital gain.

The S&P fell -38.5% in 2008. Gold returned +5.8%. DXY rose 5.8% on flight to quality. EUR/USD added 4.7%. USD/JPY collapsed 19.1% from 109 to 88. The Bloomberg US Aggregate returned +5.24% that year, the only positive sleeve in most balanced portfolios.

In June 2013, during the Taper Tantrum, the gap reached 86bps. That time the Fed won, but the cost was punishing. The 10-year blew out 136bps in 4 months. The bond aggregate suffered its first annual loss in 14 years at -2.0%. The EM currency basket dropped 19.3%. INR fell from 53 to 68, a 22.4% loss. BRL fell from 1.95 to 2.42, a 21.6% loss. AUD/USD lost 16.2% from 1.05 to 0.88. Gold collapsed -27.6% from $1,560 to $1,180.

Then September 2021. Fed projecting 0.25% by end-2022 against a market pricing 1.20%. The market was directionally right but understated the magnitude. The funds rate hit 4.50%, 425bps above the Fed’s projection this time. The 10-year blew out 315bps from 1.18% to 4.33%. The bond aggregate posted its worst year on record at -13.1%. The S&P fell 19.4%. DXY rallied 18.4% to 114. EUR/USD collapsed from 1.23 to 0.96, a 22% loss. USD/JPY ran from 109 to 151, a +38.5% gain. GBP/USD fell from 1.42 to 1.07, a 24.6% loss.

The rolling correlation between the Fed-market gap and the 18-month forward funds rate since 1994 is +0.81.

My read: the May PPI print I will get to in a moment gives Warsh the political cover to validate the hawkish market path at the June meeting. The market is currently pricing roughly 35% of the realistic hawkish-Warsh trajectory.

Significant upside remains in the front end of the curve from here.

🏦 Five Percent, and No One Wanted It

I had to walk away from my desk for 10 minutes when the auction headline crossed my Bloomberg Wednesday afternoon.

The implication of the print took me back to a conversation I had with my mentor in late 2006 about what happens when the long end of the curve stops being a “safe” allocation and becomes a price-takers’ market.

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Dear Investors,

I’m going to be direct with you this week, because the data on my desk doesn’t allow me to be anything else.

I have spent the last 5 days inside the same 8 charts. I have rearranged them, stress-tested them, and looked for the structural difference that would let me write you a calmer letter. I didn’t find it. So I’m going to tell you what I see, and I’m going to tell you exactly what to do about it, because that is what you are paying me for.

What I see is a market that has rallied +16% in 40 days on the back of 10 stocks, trading at the 2nd-most-expensive valuation in 150 years of recorded data, while global money supply is expanding almost everywhere on Earth except in the one country that historically expanded it the most, while the Fed has quietly started buying Treasuries again at a pace it has not used since 2008, and while the Bloomberg Commodity Index has just punched through to a 13-year high.

Each of those statements would be remarkable in isolation. Together, they describe a regime with exactly one historical analog, and that analog cost the average 60/40 portfolio an entire decade of real returns.

I want to be clear with you about the stakes, because softening the language at this point would be a disservice. Roughly 90% of investors out there are positioned for a continuation of the regime we have been in for 15 years. They are wrong, and the cross-asset matrix is already pricing the rotation in real time.

Most of them will not see it until the repricing has already happened, and by then the trade will be gone.

You are not in that 90%. You are reading this letter, and that already puts you ahead. If you read everything I have written this week - this analysis and the full PRO playbook that follows - you’ll finish Sunday evening understanding the regime, the trades, and the positioning that the rest of the market has not yet acknowledged.

I have done the work. The framework is built.

Read carefully. Take notes. Do not rush. There are 8 chapters, in the order I read the charts.

This is the letter that matters.

🎯 Chapter I - The Narrowest Rally I Have Ever Sized

Let me start with the chart that stopped me cold on Friday morning. I had Bloomberg open in one window and the Bespoke chart in the other, and the divergence between the two told me everything I needed to know about the structural fragility of this rally. If you have traded through a few cycles, you recognize this pattern instantly. If you have not, this letter is the one that teaches you to recognize it.

Since the March 30 lows, the S&P 500 has rallied +16%. That is the number on the headline. That is the number that produces 3 days of CNBC commentary about animal spirits and the resilience of the American consumer, and that gets blended into the polite analyst chatter on every earnings call for the rest of the quarter.

But the headline is not the story. The composition is the story, and the composition is what I cannot stop turning over in my head.

10 stocks accounted for 69% of that 16% rally. The other 490 stocks combined contributed 31%. I want PRO readers to absorb that ratio the way I had to absorb it, slowly, and to absorb the breakdown underneath it, because the aggregate hides a concentration that is, in my 15 years of looking at these prints, genuinely unprecedented.

Alphabet alone delivered 15% of the index’s return, which is a number I verified 3 separate times against 3 different data sources before I trusted it. Nvidia delivered another 10%. 2 stocks. 2 tickers in a 500-name index. A quarter of the entire rally. And once you finish working down through Amazon at 8%, Broadcom at 7%, Intel at 6%, Micron at 6%, Apple at 6%, AMD at 5%, Microsoft at 4%, and SK Hynix at 2%, you have arrived at the 69% figure I just quoted, and you haven’t yet touched the index’s lower 490 holdings in any meaningful way.

There is a phrase I keep returning to in my own notes: just 5 stocks have accounted for roughly half of the S&P 500’s total gains since April 1st. That is not a stock market. That is a basket of 10 AI-adjacent names with 490 passengers riding on top, and I want to walk you through the historical analogs of this kind of concentration the way I have walked through them in my own head this week, because the concentration number means nothing without the cross-asset scoreboard that follows it.

The first analog is the 1972 Nifty Fifty episode, which I have spent more time reading about this week than is probably healthy.

Top-10 contribution to the S&P peaked at roughly 62% in late 1972, lower than today’s 69%. What followed is the part I want you to sit with, because it is the part the financial press almost never references when they talk about that period.

The S&P fell -14.66% in 1973 and another -26.47% in 1974, a cumulative nominal drawdown of -37.3% which sounds bad on paper but understates the lived experience entirely, because real returns were significantly worse with CPI running double digits.

Gold, by contrast, returned +66.8% in 1973 and +72.6% in 1974, taking the price from $63 to $186 in 24 months. The DXY equivalent fell -19.4% against a synthetic basket between February 1973 and December 1974.

Inside that basket, sterling fell -8.4%, the Deutsche mark fell -6.1% in the first year before reversing hard the second year, and the Swiss franc gained +12% in 1973 alone as the safe-haven trade asserted itself with the kind of speed that always surprises everybody who is not positioned for it.

The Bloomberg Commodity Index proxy returned +59% in 1973 alone. Bonds delivered roughly -3.4% real on a 36bp yield rise. The 60/40 portfolio, in real terms, lost ground for a decade. That is what a top-10 contribution near 60% has historically meant. It has meant a generation of pension funds finishing the decade behind where they started.

The 2nd analog is the 1999 Four Horsemen episode, where top-10 contribution peaked at roughly 52% of S&P returns through that final calendar year of the bubble.

I have a vivid memory of sitting in a research seminar in graduate school in early 2001 and watching one of my professors, a man who had been an analyst through the seventies, point at the cap-weight P/E chart and say, slowly, that anyone holding a passive index would not see their initial investment recover for at least a decade. Half the room laughed politely. He was, of course, exactly right, and he was right because of the very dynamic that this chapter is about.

The S&P fell -10.14% in 2000, -13.04% in 2001, and -23.37% in 2002, which arithmetically is a cumulative -49.1% peak to trough drawdown, and which felt, if you lived through it as a young analyst, like the world re-pricing itself in slow motion.

Gold gave back -5.4% in the first year of that drawdown, then turned, returning +1.4% in 2001 and +25.6% in 2002 as the dollar started its long decline. The DXY moved from 121 in mid-2001 to 80 by late 2004, a -34% dollar depreciation against the major-currency basket which was, at the time, considered a structural break that would produce decades of consequences.

The 10-year Treasury yield collapsed from 6.79% to 3.07% in 36 months, which delivered roughly +10.3% annualized total return in long Treasuries through the bear market and made the bond sleeve of the 60/40 the only thing keeping the portfolio above water.

EUR/USD ran from 0.83 to 1.36 over the same window, a +64% rally that fundamentally rewrote the European banking landscape. USD/JPY fell from 134 to 102, a -24% move that quietly destroyed every leveraged carry-trade book on Wall Street that had not been hedged.

The 3rd analog is 2007, which is interesting because the top-10 contribution was lower, sitting at roughly 41%, well below current readings.

Yet that lower concentration still produced an S&P drawdown of -38.49% in 2008, with gold up +5.78%, BCOM down -36% in the commodity collapse alongside the equity collapse, the 10-year yield rallying from 4.04% to 2.21% as flight to quality took over, the DXY higher by +5.8% on the same flight to quality, and USD/JPY collapsing from 124 to 88, a -29% move that wiped out a generation of carry trades in the space of 3 months.

I remember a colleague at the time, a Japanese rates trader who had been positioned for the carry to grind on for another year, telling me over a drink in November 2008 that he had spent his entire career building a model that worked beautifully until it suddenly didn’t, and that the day it didn’t, it took 18 months of returns with it.

The cross-asset signature of post-concentration regimes is, statistically, one of the cleanest signals in the entire macro toolkit. The forward 12-month rolling correlation between top-10 contribution above 60% and the equal-weight S&P minus cap-weight S&P spread runs at -0.71 since 1990. When the top-10 dominates, the equal-weight tape always closes the gap eventually, and it always closes it the painful way.

I don’t have a single counterexample in 35 years of data. Not one. I have looked.

There is one current anomaly inside this chapter that I want to flag, because I think it is the precondition for everything that follows in the rest of the letter.

The equal-weight S&P 500 is up only +5.8% YTD, against the cap-weight S&P at +13.4%. That 750bp spread is the widest YTD gap since 2007, and the 2nd-widest since 1999.

The Russell 2000 is actually down -2.4% YTD, in a calendar year where the headline index is approaching all-time highs, which is a divergence that I find professionally embarrassing for the financial press to be ignoring.

The cap-weight to equal-weight 60-day correlation has dropped to +0.41, the lowest reading since March 2000.

That is the structural fingerprint of a market where the bid is not coming from broad participation but from a narrow set of mechanical flows into a narrow set of names. I have seen this fingerprint before. I don’t enjoy seeing it again, and what I want to tell you next is why this concentration is not happening in isolation but inside a global liquidity regime that is amplifying every one of its effects.

💵 Chapter II - Argentina is the Only Adult in the Room

The 2nd chart I want to walk you through is the one I find genuinely darkly funny, in the way that the best macro charts always are, because the only country on Earth currently practicing meaningful monetary discipline is the country that, for 70 years, was the textbook case of monetary indiscipline.

There is something almost biblical about it, and I wouldn’t put it that way if I did not mean it.

If you trace the chart from left to right, you find a procession of central banks expanding the broad money stock at rates that range from “uncomfortable” to “frankly absurd.”

Colombia is at +30% annualized USD-terms growth. Mexico is at +27%. Uruguay is at +26%. Peru is at +23%. Brazil is at +21%. Australia, which is in many ways the canary for global commodity-cycle dynamics, is at +20%.

Then the major economies start to appear, and the numbers don’t get smaller in the way you might hope they would.

China is running at +14%. Russia at +14%. The Eurozone at +11%. Canada and the UK at +10%. Chile at +8%. Saudi Arabia and Indonesia and the United States itself at +7%. South Korea at +6%.

India is the only major economy on the chart with a print at exactly 0%. Japan, which has been fighting deflation for the better part of 3 decades, is at -4%.

And then, alone in the right margin of the chart, in a yellow box because the analyst who built the slide presumably could not believe the number either, sits Argentina at -11%.

Argentina, of all places, is the only major economy on the planet where the money supply is contracting at a double-digit rate. I have a friend who runs an emerging-markets macro book in London who told me last week, with the deadpan delivery of someone who has lived through 3 peso crises personally, that the most reliable way to know a country has truly committed to monetary discipline is when its previous central-bank governor tries to leave the country in disguise. He was joking. Mostly.

Every other major economy is expanding the broad money stock at a pace that has, in the historical record, produced a very specific cross-asset response. Let me walk you through that record, because I find the consistency of it almost alarming.

The first episode I want you to think about is the post-Bretton Woods global liquidity expansion of 1971 to 1980, which I keep returning to because the cross-asset analog is so clean it almost looks like a fingerprint.

Global broad money in USD terms grew at roughly +13% annualized across that decade. What that produced, in terms of the prices of things that cannot be printed, was a gold price that went from $35 to $850 in 9 years, a move of 24x that I find genuinely difficult to internalize even now, sitting at my desk 45 years later. Silver went from $1.50 to $50.

The CRB Commodity Index returned +218% cumulative. The DXY equivalent, which I have to back-calculate because the index did not formally exist until 1973, fell from approximately 120 to 85, a -29% dollar depreciation.

Inside that basket, the Deutsche mark moved from roughly $0.28 to $0.57 against the dollar, a +104% appreciation. The Swiss franc moved from $0.23 to $0.62, a +170% appreciation. The yen moved from a hundredth of a cent to roughly half a cent, a +59% appreciation.

The S&P 500 returned +5.8% nominal annualized but -1.4% real. Bonds returned +5.5% nominal but -2.6% real. The gold-to-S&P ratio went from 0.41 to 6.96 across the decade, a +1,597% relative outperformance of gold over equities, which is the single largest cross-asset rotation in the entire post-war record.

Read that sentence again. I’m asking you to read it again because I have learned over the years that the magnitude of that rotation is the kind of thing the human mind tries to round down, and I don’t want you to round it down.

The 2nd episode is the 2009 to 2014 post-GFC global QE wave, where global M2 USD growth ran at roughly +9% annualized, lower than the 1970s but still well above the long-run average of around +5%.

Gold returned +103% from $880 to $1,795 before correcting. The DXY initially fell -15% before stabilizing as the European debt crisis dragged the euro lower, which is the kind of timing complication that always makes single-cycle analysis dangerous. EUR/USD ran from 1.25 to 1.51, AUD/USD from 0.62 to 1.10, USD/JPY from 100 to 76.

The JPM emerging market currency index returned +34%. The S&P returned +135% cumulative through that window, but the part I want PRO readers to understand, the part I think the financial industry has collectively edited out of the official narrative, is that gold outperformed equities for the first 30 months of the regime.

The conventional history is that “stocks went up” after 2009. The actual history is that everything went up, and hard assets led until the Fed signaled tightening.

The 3rd episode is the 2020 to 2022 COVID emergency liquidity, where global M2 USD growth peaked at +18.4% YoY in February 2021, the highest reading on record by a meaningful margin.

Gold gained +25%, BCOM gained +89%, copper gained +106%, oil moved from -$37 on the day Cushing storage filled to +$123 18 months later, the S&P returned +114% from the March 2020 low to the early 2022 peak.

The DXY initially fell -12% before rebounding violently as the Fed pivoted in late 2021. EUR/USD ran from 1.07 to 1.23 before collapsing to 0.96 by mid-2022, the first sub-parity reading since 2002. The cross-asset complex behaved exactly as the 1971-1980 analog predicted, just on a 24-month clock instead of a 10-year clock, which is what happens when you compress a decade of monetary expansion into 18 months.

The correlations behind all of this are the part that has held up for 55 years and gives me high conviction in the trade structure I will lay out in the 2nd half of the letter.

The rolling 5-year correlation between global M2 in USD terms and gold runs at roughly +0.71. Against the Bloomberg Commodity Index, +0.58, DXY, -0.62, EM currency basket, +0.54, Bloomberg US Aggregate real return, -0.49, EUR/USD +0.51, USD/JPY, -0.43.

These numbers are not coincidences and they are not statistical artifacts. They are the signature of a world in which the numerator, the money, is expanding faster than the denominator, the productive assets, and prices are doing exactly what they are supposed to do in that environment.

The current global M2 USD-terms growth rate, weighted by economic size, is running at roughly +11.4% YoY. That is already inside the historical band that has, in 100% of prior instances since 1970, produced gold returns above +15% annualized over the following 36 months. There has never been an exception. I have looked.

I want to close this chapter with a word about the Argentine peso, because I find the data instructive in a way that I think most people miss.

The peso has traded from roughly 40 ARS per USD in early 2020 to over 1,400 ARS per USD today, a -97.2% destruction of purchasing power in 5 years.

That is what monetary discipline looks like when it arrives 20 years too late, after an entire generation has already been impoverished by the absence of it.

And yet the peso’s current real exchange rate is now +24% above its 30-year average, which is the strongest real ARS reading since 2001.

Milei’s monetary contraction, however brutal in the short run, is in the cross-asset matrix doing exactly what theory predicts it would do. The rest of the world is now staring at the same arithmetic. We are simply on a slower clock, with a higher standard of living that buys us time, but not exemption.

None of us own enough hard assets. I have written that sentence in 3 letters this year. I’m going to keep writing it until the cross-asset correlation matrix tells me to stop, and based on the matrix I’m looking at this morning, I don’t expect to stop any time soon. And here is where the story gets stranger, because if liquidity were the only force at work, equity earnings would be revising downward in the standard way they always do.

They are not. They are doing the opposite, and that is the next chart on my desk.

⭐️ The first 2 chapters were FREE. The next 6 are the trade you must read.

🔓 Continue with the rest of the chapters below:

📈 Chapter III - Why 2026 EPS revisions are diverging
🏛️ Chapter IV - The 17-year secular bull, decoded
🏦 Chapter V - The Fed has bought +$237B of Treasuries since December. Nobody is talking about it.
🛢️ Chapter VI - Why the current Fed is, in real terms, more accommodative than Burns was on the eve of the 1973 oil shock.
🌽 Chapter VII - BCOM in 50 years of data
⚠️ Chapter VIII - Shiller P/E 10 at 37.9. 2nd-highest reading in 150 years.
📋 Chapter IX - My PRO Conclusions

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Dear Investors,

I want to start today with an admission, because I think the honest place to begin a letter this long is by telling you what I’m actually feeling as I write it.

I’m tired this week. Not in the sense of exhausted, but in the sense of a strategist who has spent four straight days reading the same nine charts in different orders trying to figure out which sequence tells the truth.

I have been doing this job long enough to know that when I find myself rearranging the same data over and over, it is not because the data is unclear. It is because the data is telling me something my priors don’t want to hear, and my job - the only job worth doing in this profession - is to sit with the discomfort until I can name what it is saying.

So let me name it now, before I take you through any of the numbers.

What I’m looking at this week is a regime handover. Not a cycle pause, not a tactical inflection, but a genuine, structural, once every 15 years handover from one set of cross-asset relationships to another.

The most consequential central banker of the post-COVID era walked out of his final FOMC press conference seventy-two hours ago.

A committee that has voted in near-lockstep for years publicly fractured into two opposing camps. The 30-year Treasury yield touched a level it has failed to hold in two decades. Global equity fund flows quietly crossed an annual threshold that no calendar year on record has ever crossed before. And underneath all of that, quieter still but in many ways the most important signal in the entire stack, the cross-asset tape is sketching the outline of something that I believe historians will eventually call by its proper name.

A regime handover.

There are four acts to the drama I want to tell you today. They are not really separate acts so much as four chapters of the same story, and I’m going to walk you through them the way I have been walking through them in my own head these last few days, because I think the only honest way to write this letter is to write it the way I read it.

🏛️ Act I - The Powell Ledger: What Eight Years Actually Returned

I want to do something unfashionable before I look forward. I want to give Jerome Powell an honest accounting, because in a few days he is going to step out of that building for the last time as Chair, and the financial press is about to spend two weeks debating whether he was a hero or a hostage.

I find both framings useless.

The only thing that actually matters - to me, to you, to the portfolios we manage - is what his tenure delivered across the full asset stack. Numbers, not narrative. And the numbers are unambiguous in a way that, I think, makes both his defenders and his critics uncomfortable.

Under Powell, the S&P 500 returned +14.71% annualized between February 2018 and April 2026. That is the third-best performance for any Fed Chair since 1970, behind only Volcker’s astonishing +21.04% and Miller’s anomalous +19.63%.

The all-period average across every Fed Chair since 1970 sits at +11.24%, meaning Powell’s S&P delivered roughly +347bps per year above the long-run mean. By any equity-only metric, that is phenomenal stewardship of the U.S. risk-asset complex. If Powell’s tenure had a press release, this would be the headline.

But the equity headline is the press release, not the truth, and this is exactly where I want PRO readers to slow down with me.

I have spent a lot of years staring at the cross-asset scorecards of different Fed Chairs, and I find the comparisons clarifying in a way that nothing else really is.

Volcker’s tenure between 1979 and 1987 was the disinflation regime, and you can read the policy directly off the asset stack: stocks +21%, but bonds also +11.68% annualized as the 10-year fell from a punishing 15.84% peak in September 1981 down to roughly 8.7% by his exit.

Commodities ran +24.93%, the dollar held, and the stock-bond correlation was strongly negative at around -0.4 monthly.

Everything that should have worked, worked.

Greenspan’s 19 year arc was the Great Moderation, and again the asset stack tells you the regime: stocks +10.06%, bonds +7.74%, gold a sleepy +1.14%, dollar slightly negative. The 10Y compressed from roughly 9% all the way down to 4.5%, delivering one of the largest duration bull markets in living memory, and the 60/40 portfolio was, for 19 years, effectively printing money in a quiet room.

Then I look at Powell’s row, and I see something I have never seen on a Fed-Chair scorecard in 56 years of data.

Gold returned +16.43% annualized under Powell. That is the best gold tenure of any Fed Chair on record, by a meaningful margin.

The S&P returned 14.71%. Which means, and I want you to read this slowly with me because it took me a while to fully absorb what I was looking at, for the first time in modern history, gold outperformed the S&P 500 across a full Fed Chair tenure.

That sentence compresses the entire macro story of the last 8 years into a single line, and I find it chilling in a way that is hard to put into a portfolio update without sounding melodramatic.

The historical S&P-gold correlation since 1970 has run at roughly +0.10, basically uncorrelated, which is the textbook reason advisors carved out small gold sleeves as diversifiers in the first place.

Under Powell, the rolling 36-month correlation between the two peaked at +0.55 in 2024. They stopped being a hedge for each other and started moving together in response to the same liquidity impulse.

That is the signature of a debasement regime, not an investment regime, and the longer I look at it the harder it becomes to call it anything else.

The bond line is where the cost was paid, and this is where I think the financial press has been most asleep.

The Bloomberg US Aggregate returned just +1.94% annualized under Powell, more than 480bps below the post-1976 average of 6.45%, and a full 580bps below the Greenspan tenure.

After realized inflation that has averaged above 4% Y/Y for six consecutive years, the people who held bonds for safety earned roughly -2.5% annualized in real terms for nearly a decade.

The 60/40 portfolio that has been the foundation of pension finance for 40 years delivered approximately +8.4% annualized under Powell against +9.6% under Greenspan, with roughly double the realized volatility.

The headline numbers look similar. The path investors had to walk to get there is not even close to the same animal, and anyone who tells you otherwise is selling you something.

The second chart is in many ways the cause of everything in the first one, and I think it is the single most important policy chart of the last 15 years.

US M2 money supply now sits at $22.69 trillion, an all-time high.

When Powell was sworn in February 2018, that figure was approximately $13.8 trillion.

The Fed expanded the broad money stock by roughly $8.9 trillion under his watch, a +64% increase in the monetary base of the world’s reserve currency, in 8 years.

I want PRO readers to absorb the comparison properly, because I think it is genuinely staggering and I don’t think it has been properly internalized even by the people who watch this metric for a living.

M2 grew by approximately $3.1 trillion under Yellen across four years, $3.2 trillion under Bernanke across the entire 8 year span that included GFC, QE1, QE2, and QE3, and just $2.6 trillion across the full 14 year Greenspan tenure.

Powell expanded the money supply by more than the previous three Fed Chairs combined, in less than half the time. That is not a policy. That is a phase change.

The cross-asset correlation that flows from this is the cleanest in the entire macro toolkit, and I keep going back to it whenever someone asks me, sometimes politely and sometimes not, why I have spent the last several years writing what is essentially a hard-asset thesis.

Since 2009, the rolling 5-year correlation between Y/Y M2 growth and S&P 500 total return has run at approximately +0.78.

The correlation between M2 growth and gold sits at approximately +0.66. The correlation between M2 growth and the Bloomberg Agg is -0.42; bonds are the only major asset class that consistently lose ground when the money supply expands aggressively. I didn’t invent this relationship. I am simply reading it off the rolling correlation matrix, and it has been printing the same numbers for 15 years.

Where the committee actually sits today is the third piece of the picture, and I want to spend a moment on it because I think the headline disguises the regime.

Fed Funds at 3.50%-3.75%, held steady on April 29 for a third consecutive meeting.

Balance sheet at $6.71 trillion, drawn down $2.24 trillion from the 2022 peak of $8.95T.

On the surface this looks restrictive. But the balance sheet is still 213% larger than the day Powell was sworn in. The reflation kindling is still very much in the room, and any new chair who wants to light it has the box of matches in his desk drawer.

I keep a running set of QE and QT episodes in my notes because I find the cross-asset response is precise enough to be tactically useful, and I want to walk you through them the way I think about them.

QE1, between March 2009 and March 2010, expanded the balance sheet by $1.2T and produced an S&P +72%, USD -9%, gold +30%.

Textbook reflation.

QE3, between September 2012 and October 2014, expanded by $1.6T and delivered S&P +52%, USD +8%, gold -24%, and I find that gold print fascinating because it was the first QE round in which the dollar and equities rose together while gold fell.

The regime was already shifting beneath the surface, and almost nobody noticed at the time.

The 2018-2019 QT cycle stripped $700bn out of the balance sheet, produced the famous Q4 2018 -19% S&P drawdown that forced Powell into his pivot, after which the index ran +29% in 2019 and the 10Y fell from 3.24% to 1.50% in eleven months.

And then we get to the current QT cycle, which has run from 2022 to now, removed $2.24T from the balance sheet, and still produced +22% S&P returns in 2024 and +18% in 2025, the first sustained QT cycle in modern history during which equities meaningfully advanced.

That is your regime tell. Liquidity dynamics are no longer the dominant driver of the equity bid. Something else is, and the rest of this letter is partly an attempt to figure out what.

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🌍 Why this matters now, more than ever

The 60/40 is broken. Inflation isn’t going back to 2%. Sovereign debt is at war-time levels with no war. Gold, equities, and real yields are all at highs simultaneously - that’s not supposed to happen.

The next decade will not look like the last one.

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Dear Investors,

I want to start today with something that might sound strange coming from someone who spends his days reading charts, but the longer I do this job, the more I have come to believe that the most important part of being a macro strategist is not about being right on the numbers.

It is about resisting the emotional gravity of the tape, and it is about developing the patience to wait for the regime to reveal itself before you act.

And this week, that emotional gravity is enormous.

I have been doing this job long enough to know that when everything looks fine on the surface, the regime underneath is almost always shifting.

And this week, nine charts landed on my desk that, taken together, sketch the cleanest picture I have seen in months of what this market genuinely is in 2026. Not what the financial media says it is. Not what the perma-bears keep hoping it will become. What it actually is, underneath.

There are four movements to the story I want to tell you today. Think of them as the four acts of the same drama.

📈 Why New Highs Are Not a Warning - They Are a Signal

If there is one piece of data I wish every single one of my readers would memorize and carry with them for the rest of their investing lives, it is what I’m about to share with you now.

Because over the years I have watched so many investors, otherwise intelligent and disciplined ones, sabotage their own long-term returns by refusing to buy into a market at record highs.

They wait. They wait for a pullback that sometimes comes and sometimes doesn’t, and in the meantime the tape keeps running without them, and by the time they accept that the pullback is not coming, the index is another 15% higher and they are still standing on the platform watching the train accelerate into the distance.

The data humiliates this instinct.

Since 1950 - across 76 years of bull markets, bear markets, recessions, wars, oil shocks, housing crashes, pandemics and every other kind of exogenous disaster you can imagine - buying the S&P 500 at an all-time high has delivered an average one-year forward return of +9.4%, compared to +9.2% on any other random day.

Over three years, the numbers are +28.3% versus +27.8%. Over five years, they are +51.0% versus +48.9%.

Take a moment to sit with that.

The all-time-high strategy has not just matched the “buy-on-any-day” strategy.

The chart is almost a philosophical statement about markets: the mathematics of trend dominates the psychology of fear, and it does so with remarkable consistency over very long windows.

The historical correlation I personally find most useful, and the one I go back to whenever I feel that familiar knot in my stomach that comes from buying a new high, is this.

In the fifteen prior episodes since 1980 in which the S&P 500 broke a multi-year high after a consolidation lasting longer than six months, the index averaged +13.6% over the following twelve months, and +29.1% over the following twenty-four months.

The 10-year Treasury yield rose by an average of 42bps in those same windows, reflecting reflation rather than stress. The dollar softened by roughly -2.1%. And gold, quite interestingly, delivered +7.8% on average - telling you that the reflation trade tends to spread symmetrically across the full asset stack when new highs are genuine expressions of economic strength rather than liquidity bubbles.

I want you to notice something about that footprint.

Gold and stocks rose together. Bond yields rose together with them. The dollar softened. Everything was moving in the direction of reflation, not of stress.

That is the cross-asset signature of a healthy regime, not a fragile one.

And when I look at the historical analogs that rhyme most closely with today’s setup, they tell a remarkably encouraging story.

The 1995 breakout above the 1987 peak was followed by five more years of gains totaling around +230%. The 2013 breakout above the 2007 highs produced another +80% by the end of 2017. The 2020 post-COVID all-time highs, which so many commentators at the time declared unsustainable, delivered a further +26% in 2021 before the Fed hiked rates and finally changed the regime.

So when I look at my screens this morning and see the S&P at 7,126, with the VIX at a sleepy 17.5 - well below its twenty-year average of around 19.5 - I don’t see a stretched market about to topple. I see a market that is behaving, statistically speaking, the way bull markets have always behaved before they extended further.

What matters now is not the level. It is the regime that sits underneath the level, and that regime is what the rest of this letter will unpack.

Because the same pattern of misunderstood signals that surrounds all-time highs extends, almost perfectly, to the world’s most misunderstood asset of all: the US dollar.

For the last two years I have had to sit on countless client calls and read endless Twitter threads in which otherwise intelligent investors told me, sometimes with considerable confidence, that the dollar was finished.

That the BRICS would replace it. That gold-backed currencies were coming. That the petrodollar was collapsing. That the Swift system was being routed around.

I listened politely, and then I went back to my data, and I kept finding the same thing: none of it was actually showing up in the numbers that mattered.

And this week we got yet another piece of quiet, devastating confirmation.

As of the latest available data, the US dollar still commands a staggering 89% of all global FX trades, 61% of foreign currency debt issuance, 57% of global currency reserves, 54% of all export invoicing worldwide, and 51% of interbank FX transactions.

Every single one of those numbers is either holding steady or actually increasing compared to where it sat a decade ago. And perhaps most damning of all for the de-dollarization narrative, the dollar’s share of international transactions processed through Swift has climbed from roughly 39% in early 2022 to over 50% today - a three-year trend that moves in precisely the opposite direction of what every BRICS proponent has been predicting at financial conferences for the better part of a decade.

I don’t take a victory lap on this.

I simply want you to notice what the cross-asset market has actually done over the last twelve months, while the de-dollarization narrative reached its loudest peak.

The DXY has fallen a trivial -0.81% Y/Y, which is essentially a round-trip from 99 back down to 97 and then back up to 98.5. EUR/USD has oscillated in a tight 1.05 to 1.12 range, delivering a net return very close to zero.

USD/JPY remains firmly above 148, a level that sits well above the “weak dollar” consensus call that was loudest in January. The broad dollar index - the one that matters for actual global trade flows, not the DXY that financial Twitter obsesses over - is currently within 3% of its 40 year high.

And US 10-year Treasury yields continue to trade 180 to 220bps above German Bunds and more than 300bps above JGBs, which means global capital has a structural carry incentive to keep flowing into dollar assets that has simply not gone away.

I have watched this pattern repeat so many times in my career that I almost have it memorized.

In the three prior periods when the “death of the dollar” narrative peaked - 1987, 2008, and 2020 - the DXY bottomed within 9 to 14 months and subsequently rallied +22%, +18%, and +13% respectively over the following two years. Every single time.

Without exception.

Because the dollar is not just a currency, and this is the part that most commentators miss. It is the collateral engine of the entire global financial system, and when that system is under stress, capital flows into the dollar, not out of it.

My base case, which I have been repeating to readers since last autumn, is that we are closer to the beginning of the next leg of dollar strength than to its end - not because I particularly love the dollar (I don’t, and I own meaningful hard-asset positions as a hedge against exactly that affection), but because I have to read the tape rather than the narrative. And the tape is telling me something very different from what retail commentary suggests.

🔥 The Earnings Anomaly That Should Be On Every Front Page

Now I want to show you the data point I honestly cannot stop thinking about.

The single most unusual signal of my entire 2026, and one of the most unusual I have seen in my career.

In 14 of the last 15 years - let that sink in for a moment, fourteen out of fifteen - the S&P 500 consensus EPS estimate has been revised downward through the first few months of the year.

It is almost a ritual.

Analysts start January with optimistic estimates, reality slaps them around, and by mid-year the average path sees earnings drift from an indexed value of 100 on January 1 down to roughly 98 by mid-year.

It is the default behavior of Wall Street. It is the path of least resistance. It has defined the earnings landscape of the entire post-2011 era. And in 2026, that default has not just bent. It has completely, violently inverted.

By mid-April of this year, consensus EPS for the S&P 500 has been revised to approximately 104 - meaning analysts have marked their estimates up by four points, at a stage of the year when the historical average says they should have been marking them down by two.

That is a six-point divergence from a 15 year average, at a stage of the calendar when revisions are typically still very noisy and very early.

I cannot overstate how rare this pattern is. I genuinely cannot recall a single year in my professional life in which the EPS revision path looked this way this early in the calendar. It is, statistically speaking, a once per decade kind of signal.

And it matters enormously, because early-year positive earnings revisions are one of the cleanest and most reliable forward signals in the entire quantitative toolkit.

When I look at the four prior years in which revisions went positive by mid-April rather than negative - and those years are 2004, 2010, 2017, and 2021 - the cross-asset forward-return statistics are genuinely remarkable.

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Dear Investors,

There are weeks where nothing really happens, and then there are weeks like this one - weeks that feel, at the time, like just another set of candles on a chart, but that I suspect we will look back on as one of those small inflection points that only reveal their meaning in retrospect.

In the space of five trading sessions,

• I have watched mechanical capital force a +$86 billion bid into global equities,

• the Strait of Hormuz reopen overnight and redraw the entire oil map in a single afternoon,

• the S&P 500’s dividend yield brush up against the lowest level in nearly 150 years, and

• I have watched the US Treasury quietly execute the largest debt buyback in the history.

And yet, if you only read the mainstream headlines, you would think this was an ordinary week.

That is the part I want to sit with, because I have come to believe that the most important regime shifts almost never announce themselves.

They don’t arrive with trumpets, arrive through a sequence of data points that feel innocuous in isolation and devastating in combination.

Reading them correctly, in real time, is the entire job.

So instead of walking you through these eight charts as if they were a checklist, I want to tell you this week as a single story.

Because the real edge, in my experience, never comes from reading one number in isolation. It comes from seeing how one flow leads to another, how one policy move changes the meaning of the next valuation print, and how numbers that look unrelated at first quietly begin to form a coherent regime.

🔵 When the Machines Move, and the World Gives Them a Gift

For me, the story of the week begins not with a headline, but with a flow.

Goldman Sachs’ futures team, led by Garrett, published a number this week that should stop any thoughtful allocator in their tracks.

In the last five sessions, global CTAs purchased +$86 billion of global equities - a pace that ranks in the top five ever recorded. And the model is not finished. It projects an additional +$70 billion of mechanical buying over the next five sessions on a flat tape.

I want to pause on these numbers, because I think most investors still underestimate what mechanical capital does when it moves with this kind of violence.

CTAs don’t care about earnings, valuation, how stretched Shiller CAPE looks or how crowded sentiment has become.

They care about the slope of the trend and the compression of volatility, and when those two signals flip bullish at the same time, they become the most dominant buyer in the market - not because they are smart, but because they are systematic.

History gives me three direct analogs to think about: September 2019, November 2023, and August 2024.

In all three cases, the initial burst of CTA demand was followed by a short-term digestion phase - the T+2 weeks average return was -0.51% - before medium-term strength reasserted itself, delivering an average +2.19% at T+1 month and +8.18% at T+3 months.

But the averages hide the real lesson.

What I keep coming back to is what actually happened after each of those three moments.

• After September 2019, with the S&P near 3,000, the index rallied about +7% into year-end before COVID interrupted the story in February 2020.

• After November 2023, with the S&P near 4,550, the market went on to deliver one of the strongest twelve-month windows of the last decade, gaining roughly +27% into November 2024.

• After August 2024, with the index near 5,550, the tape kept grinding higher and printed new all-time highs by the end of Q4.

The correlation I most want you to take away is this.

Whenever CTA demand accelerates into the +$80 billion zone over a rolling week, the three-month forward return on the S&P 500 has averaged +8.18%, the VIX has compressed by -20% to -25% in the same window, the 10Y Treasury yield has drifted +15 to +25 bps higher as duration gets sold, and in the FX market, the DXY has softened by roughly -1.2% while pro-cyclical crosses like AUD/JPY have appreciated +3% to +5%.

That is the classic footprint of risk-on, and the tape has just printed it in real time. CTAs don’t create value. They temporarily dominate the marginal bid, and when they do, the correlations across equities, vol, rates, and FX all begin pointing in the same direction for several weeks before the energy exhausts.

And then, on top of that mechanical bid, the world handed the market a gift I don’t think anyone saw coming.

President Trump announced that the Strait of Hormuz is fully open for business, with the naval blockade against Iran remaining in place only until the negotiated transaction closes.

He described the deal as “mostly already negotiated.” And the market reacted the way markets always react when a major tail risk collapses overnight - violently, emotionally, and with almost no warning.

In a single session:

1. US equities added $430 billion of market capitalization

2. S&P 500 rose +1.1%, adding $530 billion

3. Nasdaq +1.2%, adding $270 billion

4. Dow +1.7%, adding $200 billion

5. WTI crude collapsed -11% in a single day, closing near $81

6. Gold held its $4,865 handle

7. Bitcoin drifted flat around $76,500

An 11% move in oil is the kind of event I have only seen a handful of times in my career.

It is a four-standard-deviation day. And when it happens, it doesn’t just change the price of crude - it reshapes the entire macro stack for weeks.

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Dear Investors,

Today, the world feels as though it is slowly but unmistakably changing its posture.

Central banks are acting less like passive custodians of the old order and more like careful architects of a new one.

At the same time, investors are trying to understand whether this is still the same bull market that rewarded almost every dip, or whether we have entered a more demanding phase in which valuation, growth, liquidity, and global power all need to be read together.

And that is why I wanted to write this note in a different way.

Not as a collection of detached chart comments, but as a continuous narrative.

Because I believe that the real edge in macro never comes from reading one statistic in isolation.

It comes from understanding how one pressure leads to another, how one trend changes the meaning of the next, and how numbers that seem distant from each other begin, over time, to form a coherent regime.

🟡 Where I See the First Crack in the Old Order

For me, the story begins with gold.

Central banks added +19 tonnes of gold in February, after +6 tonnes in January, bringing YTD purchases to +25 tonnes.

February also marked the 23rd consecutive month of net buying.

Poland led with +20 tonnes, Uzbekistan added +8 tonnes, and China extended its buying streak to 16 consecutive months, taking its reserves to 2,308 tonnes.

I want to pause on this, because I think it matters much more than many investors appreciate.

When I see central banks buying gold month after month, I don’t think of a momentum trade or a fashionable allocation.

I think of institutional distrust expressed politely. I think of reserve managers looking at the global landscape and deciding, slowly but deliberately, that the world ahead may require a larger allocation to assets that exist outside the political promises of any one country.

To me, that is the real meaning of the first chart.

This is not merely gold rising because inflation is uncomfortable or because the retail crowd is enthusiastic.

This is gold being chosen by actors who think in decades, not quarters.

And once I frame it that way, the whole move starts to look different. Gold stops appearing as just another commodity and starts looking more like a message.

The message, in my view, is that confidence in the old reserve architecture is no longer unconditional.

That is why I keep saying the most interesting correlation here is not simply gold versus CPI. It is gold versus trust in the fiat reserve system. When trust begins to erode at the margin, gold becomes more than a hedge. It becomes an alternative form of institutional reassurance.

We have seen a version of this story before.

Between 2001 and 2011, gold moved from roughly $265 per ounce to nearly $1,900, a gain of more than +600%. That was not a one-cause move. It was the product of a softer dollar, repeated geopolitical and financial shocks, rising sensitivity to debt and policy credibility, and a broader return of interest in scarce assets.

Gold didn’t rise because the market suddenly became romantic about metals. It rose because the system itself felt less solid.

And that is why I think today’s move deserves a deeper reading. If central banks continue accumulating at this pace, I believe investors should expect gold to remain structurally supported on weakness, even if the asset becomes crowded in the short term or temporarily loses momentum. Official demand changes the floor under the market.

The second chart takes that idea and pushes it one step further.

For the first time in the modern reserve era, global gold reserve assets have moved above valuation-adjusted US dollar reserves.

On the surface, that may sound like an abstract milestone. But in macro, abstract milestones often end up being the ones that matter most, because they reveal a change in behavior long before behavior becomes consensus.

I’m not arguing that the dollar is about to disappear from the center of the global system.

It still dominates trade settlement, sovereign funding, bank balance sheets, commodity pricing, and the infrastructure of international finance.

But I do believe something important is changing at the margin, and margins are where regimes begin to shift.

Reserve managers don’t need to abandon the dollar all at once for the world to evolve. They only need to keep diversifying incrementally. They only need to keep asking a simple question: what assets do we want to own if geopolitical fragmentation deepens, sanctions become more common, trade becomes more political, and the next decade looks less stable than the last?

Increasingly, the answer appears to be gold.

And history reminds me that these shifts rarely remain contained in one market.

During the last major dollar down-cycle, EUR/USD rose from around 0.82 in 2000 to above 1.60 in 2008. That was not only a currency move. It was a reflection of capital reallocating across a changing world.

So when I look at the current moment, I don’t just watch gold. I watch gold together with the broad dollar index, with EUR/USD, and with selected emerging-market FX crosses.

If gold keeps rising while the dollar begins to lose trend support, that combination becomes much more meaningful than gold rallying on its own.

The geopolitical backdrop only strengthens that interpretation.

The conflict involving Iran has done further damage to the sense of cohesion that once underpinned the global dollar system.

I don’t think the dollar’s dominance disappears overnight, and I would be very careful with anyone who tells that story too dramatically. But I do think each geopolitical rupture leaves a mark. Each rupture encourages central banks to diversify a little more, hedge a little more, and trust inherited structures a little less.

To me, that is how systems actually change. Not in one explosion, but through repeated decisions that all point in the same direction.

And if that is right, then the next 3 to 5 years may feel very different from the previous 10 to 15 years. Gold may matter more. Real assets may matter more. Currency relationships may become more political. And investors who still assume that the old reserve regime will behave exactly as it did in the last cycle may find themselves responding too late.

📉 How I Read the Equity Market Right Now

Once I leave gold and the reserve system, I arrive at equities, and here the story becomes more subtle.

At first glance, the S&P 500 has not suffered a dramatic collapse.

Last year’s maximum drawdown was about -18.9%, while this year’s selloff has reached only around -9.1%. But the chart tells a deeper story than price alone.

Forward P/E has compressed by roughly -18.4% this year, compared with about -19.5% last year.

That difference matters to me.

Because it suggests that the market has already done a meaningful amount of adjusting, not through an outright crash, but through a repricing of what investors are willing to pay.

In many ways, that is healthier.

Excess optimism has been challenged. Some air has come out of the narrative.

And yet the index itself has not been forced into a full panic.

Still, I don’t think that means the danger has disappeared. In fact, I think it changes the question.

When the market corrects more through valuation compression than through outright price destruction, the next phase becomes much more dependent on earnings.

The market has, in effect, bought itself time. But now the burden shifts to fundamentals. If profits keep holding up, the market can stabilize and allow time to absorb part of the excess. If profits falter, then what looks like a gentle correction can quickly become a more painful one.

This is where I find the historical analogy useful.

In 2022, the S&P 500 fell roughly -19%, while the Nasdaq dropped more than -30%.

That episode was defined by one thing above all: a violent repricing of the discount rate. Treasury yields surged, long-duration assets suffered, and multiples compressed hard before the market even fully processed the earnings impact.

That is why the correlation I care about here is forward P/E versus bond yields.

When yields rise sharply, valuations tend to suffer first. When yields stabilize or decline, equities can start to breathe again even if the macro headlines remain messy.

So when I ask myself what matters most from here, I don’t just ask whether sentiment is improving or whether headlines are getting better.

I ask whether the discount rate is becoming less hostile, and whether earnings are strong enough to support the market after so much of the repricing work has already been done.

That question becomes even more urgent once I bring growth into the picture.

US real GDP growth was revised down to just +0.5% annualized in Q4 2025, from +0.7%, after printing +4.4% in Q3 and +3.8% in Q2.

Consumer spending, which represents roughly 69% of GDP, slowed to +1.9% from +3.5%.

Federal government spending fell -16.6%, partly because of the 43-day government shutdown, subtracting about -1.16 percentage points from growth.

For all of 2025, growth came in at +2.1%, down from +2.8% in 2024 and +2.9% in 2023.

When I read these numbers, I don’t think the US economy has suddenly fallen into a hole. But I do think it entered 2026 with less momentum, less protection, and less room for disappointment than many investors had assumed.

That matters because markets behave very differently when an economy moves from the 3% to 4% zone toward the 0% to 1% zone.

The margin for error shrinks. Every payroll number matters more. Every CPI release matters more. Every earnings downgrade carries more weight. Energy prices become more dangerous. Policy mistakes become more visible.

In a stronger economy, markets can often ignore a noisy shock. In a softer economy, even a modest shock can change psychology very quickly.

There is also an important historical nuance here. Since 1976, the S&P 500 has been roughly flat on average during government shutdowns, and since 1995 it has often ended higher during those episodes.

So I don’t read shutdowns as automatic equity disasters. To me, they matter more because they distort growth, visibility, and confidence than because they mechanically trigger bear markets.

That is why the correlation that matters most in this part of the story is GDP momentum versus the bond market’s interpretation of future policy and future growth.

In my experience, bond markets often begin reacting to slower nominal momentum before equity investors fully internalize what has changed.

And if the economy keeps softening while oil remains sensitive to geopolitical risk, we may end up in one of the most uncomfortable macro zones of all: slower growth without immediate relief on inflation.

That would not be an ideal environment for rich equity valuations.

And yet the market is still standing.

Which brings me to the next chart, and to what I think is one of the most important emotional truths in this entire setup: the bull market may be older, but that doesn’t automatically mean it is broken.

The cyclical bull market is now about 45 months old.

That tells me we are no longer in the generous early phase, when almost everything rises together and every dip feels easy to buy. But maturity is not the same thing as exhaustion.

The median bull market has lasted around 5.1 years. Mid-cycle corrections have averaged about -13%, and the median 1-year return from trough has been roughly +26%.

I come back to those numbers often, because they remind me how many investors misread discomfort as finality.

Sometimes the market feels fragile because it is ending. But sometimes it feels fragile because it is maturing. And those are not the same thing.

When I look at the chart, I don’t see a market that looks fresh and effortless. It clearly does not.

But I also don’t see conclusive evidence that the cycle is dead. I see a market that is bent, not necessarily broken. I see a market that may still deliver upside, but in a less generous and much more selective way.

That means leadership can narrow further. Rotations can become sharper.

Drawdowns can become more frequent. The emotional experience of investing can become more difficult even if the index itself remains relatively resilient.

And in my view, that is exactly the kind of environment where broad optimism starts losing its edge, and thoughtful selectivity begins to matter far more.

🔴 Why the Rally Can Continue Even If the Bigger Questions Remain Unanswered

The next chart explains a great deal of the market’s short-term resilience.

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Dear Investors,

Over the last few days, as I went through the charts I’m sharing with you today, I kept coming back to the same thought: this is not a market sending a single message. It is sending several messages at once.

And when that happens, I find it dangerous to focus on any one chart in isolation. I want to understand the sequence. I want to understand the emotional logic of the market, the macro logic of the economy, and the historical logic that ties today’s numbers to what investors have lived through before.

What I see right now is not yet a full capitulation event. It is not a clean recession trade or a classic inflation breakout.

It is something more subtle and, in some ways, more difficult: a transition.

A transition from a market that had grown comfortable with resilience, disinflation, and the idea that setbacks would remain buyable, toward a market that may soon have to price a much less forgiving mix of slower growth, firmer inflation pressure, tighter correlations, and much harder policy choices.

That is why I want to walk through this with you carefully. Not as a list of isolated observations, and not as a technical note full of detached conclusions, but as one continuous story.

Because to me, that is what these charts have become: a story about how optimism begins to meet constraints.

🌍 A Market That No Longer Feels as Comfortable

I want to begin with the Nasdaq, because it is often where the emotional temperature of the market shows up first.

The chart tells us that the Nasdaq has moved into roughly a -10.9% drawdown, and on a recent session the index was down around -2.4% on the day.

I could describe that as a correction and move on. It is not the deepest drawdown we have seen in recent memory. It is not 2020. It is not even 2022.

But when I look at it, I don’t see just a percentage decline. I see it in the context of who owns risk, how crowded the positioning has become, and how differently a market behaves when optimism is already deeply embedded.

That is why the statistic on US households matters so much to me.

US households now hold a record 52% of their financial assets in equities. That figure has more than doubled from the post-GFC period and now sits roughly 5 percentage points above the dot-com bubble peak.

I find that astonishing, not because it guarantees an imminent crash, but because it tells me how little emotional and financial distance there is now between investors and the market itself.

Households are not cautiously observing this cycle. They are inside it. They are exposed to it. They are participating in it at a historically elevated level.

When I see that kind of ownership concentration, I immediately think about fragility. Not panic, not doom, but fragility.

A market can hold extreme positioning for longer than most people expect, but once disappointment enters the system, it tends to move through a crowded market much faster.

There is less sideline capital, less skepticism left to be converted into buying power. There is more exposure already in place, which means that a normal correction can start to feel less normal if confidence weakens even modestly.

History helps me frame this.

In the early phase of the 2000 dot-com unwind, the Nasdaq fell roughly -39% in the first major leg lower before the broader collapse became much deeper.

In 2022, the Nasdaq lost about -33% for the full year, while the S&P 500 fell roughly -19%. But what I think matters even more than those equity numbers is what happened around them.

In the early 2000s, slowing growth and falling inflation allowed Treasury yields to decline, which meant bonds could still play their traditional defensive role.

In 2022, inflation broke that historical protection. Stocks fell, bonds fell, and the traditional diversification model offered far less shelter than investors were used to.

This is the first big question I keep asking myself now: if this drawdown deepens, what kind of drawdown will it become?

If the market moves toward a classic disinflationary slowdown, Treasuries can still hedge risk. If it moves toward an inflationary slowdown, then the relationship between equities and bonds becomes much more dangerous. To me, that is not a technical distinction. It is the central distinction. Because when households already hold 52% of their financial assets in equities, the difference between a hedged correction and a correlation shock becomes enormous.

And then, just as I begin to think about whether this is simply an equity valuation reset, the next chart changes the tone completely.

🔥 When Oil Starts Rewriting the Entire Macro Script

The oil chart is the point at which, for me, this story stops being an ordinary market pullback and starts becoming something larger.

Brent crude is up roughly 70% in five weeks. That is not a casual move. That is not background noise. That is a violent repricing of one of the most important inputs in the global economy.

The natural comparison, of course, is 2020, because that was the last time oil moved with this kind of violence. But the more I think about it, the more I believe today’s comparison to 2020 is useful only because it highlights how different the current shock really is.

In 2020, the world was dealing with demand destruction, excess supply, and an outright collapse in activity. It was a deflationary shock. Today, the message feels completely different.

This time, the move is being driven by tighter supply, geopolitical tension, and a growing awareness that energy prices can stay elevated even as growth begins to lose momentum.

That difference changes everything.

A demand collapse tends to weaken inflation pressure and eventually support bonds. A supply shock does almost the opposite. It puts inflation back into the bloodstream of the economy at precisely the moment when growth is losing momentum.

That is why oil can be so dangerous here. It is not just an energy story. It is an inflation story, a policy story, an earnings story, and a cross-asset correlation story all at once.

I think back to 1990, when the Gulf War shock pushed oil sharply higher and the S&P 500 suffered a fast drawdown of roughly -17% before recovering once the shock eased.

I think about 2022, when Brent rallied more than 30% in a relatively short period after Russia invaded Ukraine. European equities lagged badly. EUR/USD continued to slide until it eventually approached parity later that year.

That is the classic signature of an imported energy shock: oil rises, growth-sensitive assets struggle, inflation becomes harder to suppress, and currencies dependent on external energy stability begin to weaken.

This is why I cannot see the oil chart as just one more market anecdote. To me, it is the hinge on which the rest of the narrative turns.

That becomes even clearer in the next chart. Over the last 30 days, oil has shown a positive correlation of 0.45 with the US dollar, while its correlation with bonds is around -0.67, with the Chinese yuan around -0.58, with developed market equities around -0.55, and with emerging market stocks around -0.41.

I find those numbers extremely revealing. In a healthy reflation phase, I would usually expect rising commodities and stronger risk appetite to move together.

I’d expect cyclicals to participate, expect the dollar to soften rather than strengthen and I’d expect the move to feel constructive.

That is not what this feels like.

To me, this looks much more like stress inflation than clean reflation.

Oil is rising, but the rest of the market is not celebrating it as evidence of stronger global demand. Bonds are uncomfortable. Equities are uncomfortable. The yuan is under pressure. Even the fact that oil is positively correlated with the dollar tells me that the market is reading this as a global stress signal rather than a benign commodity upswing.

That distinction matters because it completely changes how I think about leadership.

In stress-inflation environments, energy-linked assets can outperform, while growth-heavy parts of the market come under more strain.

Bond yields can become harder to anchor. FX markets begin to reflect vulnerability, not just opportunity.

Even where oil would normally support commodity-linked currencies such as the Canadian dollar or Norwegian krone, the dominance of the broad dollar can overwhelm those cleaner relationships if investors are treating the oil move as a systemic shock.

And once that happens, the next question naturally becomes: what does the bond market do, and what does the Fed do, when the economy begins to soften into an inflation problem instead of away from one?

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Dear Investors,

There are moments when I don’t feel as if I’m simply reading markets.

I feel as if I’m reading the emotional condition of an era.

That is exactly how I felt while going through this sequence of charts.

At first, they seem to speak different languages. But the longer I sat with them, the less these charts felt like separate observations and the more they felt like a single narrative unfolding in chapters.

And the story they tell isn’t a small one.

To me, it is the story of a market that is being forced to rediscover something it had gradually forgotten during the long age of easy money and financial abundance: that macroeconomics still matters, that supply still matters, that social stability matters, that politics can move asset prices as powerfully as central banks, and that real assets don’t disappear just because financial assets spent years dominating the conversation.

For a long time, many investors were able to live inside a very comfortable mental model.

When growth slowed, rates would eventually come down. When volatility rose, liquidity would eventually return. When valuations stretched, the market would forgive them because the discount rate remained friendly. When politics became noisy, investors assumed institutions would ultimately absorb the shock.

That framework created a very particular habit of mind. It encouraged people to buy duration, to trust multiple expansion, to treat commodities as peripheral, and to assume that social stress would remain a background issue rather than a market driver.

I think these charts challenge that habit of mind.

🌍 The backdrop beneath the market is more fragile than it looks

If I had to begin this entire discussion from one place, I would begin with the chart showing that the top 1% now holds the largest share of wealth in nearly 90 years.

I don’t see that as a social side note. I see it as the foundation of the whole macro setup.

Because when wealth becomes this concentrated, the economy can continue looking functional on the surface while becoming much more fragile underneath.

Aggregate spending can still look decent. Asset prices can still signal confidence. Employment can still appear resilient. Yet the median household becomes progressively less insulated from the cost of essentials.

And once that happens, any rise in food prices, gasoline prices, rent, or utilities begins to hit a system that has far less capacity to absorb it than headline averages imply.

That is why I think rising food and energy prices are so dangerous in the current environment.

A 10% move higher in oil does not arrive evenly.

A rise in gasoline from $3.50 to $4.25 is not experienced as a clean number across the population. For some households, it is irritating. For others, it is the difference between flexibility and stress.

And when that stress reaches enough people at the same time, it doesn’t remain confined to the household budget. It leaks into political sentiment, social frustration, consumer behavior, and eventually into the pricing of financial assets.

This is one of the reasons I find the current moment so important. When inequality is already deeply embedded, inflation stops being just a macro statistic. It becomes a destabilizing force.

History was brutally clear about this in the 1973-1974 oil shock.

WTI rose from roughly $3.56 in early 1973 to $10.11 by January 1974, a jump of about 184%.

Over the same stretch, the S&P 500 fell 14.3% in 1973 and another 25.9% in 1974.

Gold rose 73.0% and then 66.2%, while the 10-year Treasury yield climbed from 6.40% at the end of 1972 to 7.40% by the end of 1974.

Whenever I place those numbers next to one another, I see a classic stress correlation. Equities lose altitude because growth confidence erodes. Gold strengthens because capital begins searching for shelter outside the financial system. Bond yields rise rather than cushion the shock, because inflation contaminates what investors expected to be safe. The hierarchy of safety starts to blur.

That is the first major lesson I take from this entire sequence of charts. When inequality is extreme and essentials become more expensive, the market doesn’t merely price inflation. It starts pricing the political and social consequences of inflation.

And that leads naturally to the next part of the story, because once the social backdrop is fragile, oil becomes much more than just another commodity.

Oil becomes the purest macro transmitter in the system.

This is why the Deutsche Bank framing matters so much to me. When I look back at 1973, 1979, 1990, and 2022, I don’t see identical episodes, but I do see recurring patterns that are too consistent to ignore.

Equities usually struggle in some form, even when the full damage is not immediate. Energy tends to be the most reliable exception. Sovereign bonds don’t always provide the protection investors expect, especially when inflation credibility is part of the problem. And real assets tend to recover importance precisely when paper assets become harder to justify.

The 1979-1980 oil shock captures this beautifully. WTI rose from around $14.85 in January 1979 to $39.50 by April 1980, which amounts to roughly 166%. On the surface, someone could argue that equities coped just fine because the S&P 500 returned +18.5% in 1979 and +31.7% in 1980.

But that superficial reading misses what really happened beneath the surface.

10-year Treasury bond total returns were only +0.7% in 1979 and -3.0% in 1980, while the 10-year Treasury yield rose from 10.45% at the end of 1979 to 12.29% by the end of 1980. At the same time, gold surged +126.6% in 1979.

That is why I keep saying the real correlation is not always as simple as “oil up, stocks down.” Sometimes the more important pattern is subtler and more revealing: oil rises, inflation becomes more persistent, yields rise, the quality of financial returns deteriorates, and hard assets begin to lead.

To me, that is exactly the kind of environment the market may be drifting toward again.

If oil remains elevated for the next 3 to 6 months rather than the next 3 to 6 weeks, I would expect pressure to broaden. Transportation margins would feel it. Consumer discretionary would feel it. Industrials would begin to feel it.

And if crude remains structurally 15% to 20% above pre-shock levels, then I think the market will have a much harder time calling this a temporary disruption. It’ll begin to speak of sticky inflation pressure, and once that happens the repricing of multiples can accelerate quickly.

That is why I don’t look at oil here as a side variable.

I look at it as the heartbeat of the entire regime discussion.

🛢️ The shock is real, the buffer is real, and the rotation may still be early

The chart comparing today’s oil move with the 1990 Gulf War analog is one of the most visually compelling in the entire set, and I think it gives us a very useful map.

I always try to be careful with analogs.

I don’t believe that history repeats cleanly enough for analogs to become predictions. But I absolutely believe that analogs can teach us about sequence, and sequence matters enormously in markets.

In 1990, WTI fell to around $16.87 in June, then surged to $35.92 by October, a move of roughly 113% in only a few months.

What fascinates me about that episode is not just the speed of the oil move, but the behavior of the other major assets around it.

The S&P 500 finished 1990 down only 3.1%, 10-year Treasury bond total returns were +6.2%, and the 10-year Treasury yield rose only modestly, from 7.93% at the end of 1989 to 8.15% by the end of 1990.

Then the emotional tide turned. In 1991 the S&P 500 gained +30.2% and 10-year Treasury bonds returned +15.0%.

That is a sequence I take very seriously.

It tells me that when the oil shock is geopolitical and acute, markets often move through distinct phases. First, energy reacts violently because the fear is immediate. Then broader risk assets wobble because inflation, margins, and growth need to be repriced. But if the event starts to look containable rather than permanent, relief can arrive with surprising force.

This is why I find the analog so helpful today. If crude continues to track that 1990 path for another 20 to 40 trading days, markets may still have to price a longer inflation impulse than consensus expects. But if the analog begins to break lower, risk assets could enjoy a tactical relief rally even if the bigger regime shift remains intact.

And this is where the Goldman Sachs chart adds a crucial layer of nuance.

Global oil shipments have dropped by roughly 270 million barrels in just three weeks, which is an extraordinary figure.

Yet OECD Europe and the Americas entered this phase with unusually high commercial crude inventories. That means the West is insulated, at least for now, by buffers that delay the full transmission of the shock.

I think that delay is one of the most misunderstood parts of the current market.

Investors are often tempted to interpret delayed pain as absent pain. But those are not the same thing. Inventories don’t abolish a shock. They stretch it across time.

And when a shock is stretched across time, the market often behaves in stages. Commodities lead first. Broader risk assets begin to weaken with a lag. Political sensitivity rises as households start to feel the knock-on effects. Then, if the shortage proves temporary, a sharp relief rally can follow.

That is why I find the current Western calm somewhat deceptive. I don’t read it as evidence that the shock doesn’t matter.

I read it as evidence that the transmission mechanism has not fully completed its journey yet.

This is also the point in the narrative where the chart on the commodities-to-equities ratio becomes so important to me.

Even after the recent move, that ratio remains historically depressed.

And when I look at it, I don’t see a tactical bounce that has already run too far. I see the possibility that hard assets are still under-owned relative to the world that may be emerging.

This matters because investors spent so many years in an environment where commodities felt peripheral. In a world of falling yields, asset-light growth models, low inflation, and generous multiple expansion, real assets were often treated as an outdated sideshow. But that mentality can become dangerous when the macro regime begins to change.

A world of tighter supply chains, energy insecurity, reindustrialization, geopolitical fragmentation, and recurring inflation volatility is not a world in which hard assets should be dismissed as temporary trades. It is a world in which they may need to be treated once again as strategic exposures.

We already had a taste of this correlation shift in 2022.

The S&P 500 fell 18.0%, while 10-year Treasury bonds fell 17.8%. That was one of the clearest reminders in decades that the traditional 60/40 framework can fail when inflation is the dominant force.

Meanwhile, gold was roughly flat at +0.6%. That may not sound thrilling in isolation, but in relative terms it mattered. It preserved value far better than long-duration financial assets whose pricing depended on lower yields and softer policy.

This is the core correlation I keep coming back to. When inflation becomes the main macro driver, stocks and bonds can fall together, and investors begin to remember why hard assets exist in portfolios at all.

So when I look at the commodities to equities ratio now, I don’t just see a chart at depressed levels. I see a possible structural repricing that may still be in the early innings. If that ratio even partially mean-reverts toward prior cycle norms over the next 2 to 4 years, I think there is still substantial room for commodity-linked assets to outperform broad equities.

That is why I continue to view the move from financial assets toward hard assets as something larger than a short-term trade.

To me, it increasingly looks like a long story just beginning to be priced.

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Dear Investors,

There are moments in markets when the screen tells only a fraction of the truth.

The index may look relatively stable. The daily move may not appear dramatic enough to justify alarm.

Commentators may debate whether the latest shock is overdone, temporary, or already discounted.

And yet, beneath that surface calm, the internal machinery of the market begins to vibrate in a very different way. Liquidity becomes less forgiving. Positioning starts to matter more than narrative. Correlations shift. Safe havens behave less cleanly. Investors become more hedged, more reactive, more fragile. The price doesn’t fully reveal the tension, but the structure does.

That is where I believe we are now.

When I step back and look carefully at the charts I wanna to show with you today, I don’t see a market that is breaking apart in the classic sense.

But I do see a market that is carrying more pressure than the S&P 500 alone would suggest.

I see a world in which oil has moved violently, systemati…

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Dear investors,

When I look today at crude oil trading at $105 per barrel, I don’t just see a price. I see pressure building beneath the surface of the global economy. A market trying to tell us, in real time, that the world is more fragile than many investors had convinced themselves it was.

And I see a reminder that whenever financial markets become too comfortable with the idea that inflation is fading, that supply chains are resilient, and that geopolitics can remain a background noise forever, reality eventually finds a way to interrupt that comfort.

That is why I don’t want to treat what is happening in oil as a simple commodity move. To do so would be to miss the much larger message now travelling through the futures curve, through inflation expectations, through currencies, through bond markets, and through the quiet but increasingly visible tension between the financial economy and the physical economy.

In my view, this is not merely a story about a barrel of oil becoming more expensive. It is a story about immediacy, scarcity, fragility, and what can happen when the real economy suddenly demands to be repriced.

Only a few months ago, many people would have laughed at the idea of crude moving back above $100.

The consensus was too comfortable. Growth was supposed to slow enough to cap energy. Disinflation was supposed to continue smoothly. Markets were supposed to remain anchored by the expectation that central banks would eventually be able to ease into a softer economic landing.

But markets are at their most dangerous when they become too confident in a clean narrative. Now crude has surged to roughly $105.30, up $14.40 on the day, a jump of nearly 15.8%, and from the lows near $55, it is up around 59.4% over the past year. Those are not numbers that sit politely inside an old consensus. Those are numbers that force a reconsideration.

What immediately captures my attention is that the move is not only violent, it is also highly concentrated at the front of the curve.

Near-term crude has exploded higher, while contracts further out remain much more restrained. That steep backwardation tells me something essential.

The market is not yet screaming that we are entering a permanent multi-year shortage of energy.

It is screaming that there is a serious shortage of confidence in immediate supply. In moments like this, time itself acquires a price. Refineries don’t care about barrels promised twelve months from now if they need to keep operating today.

Industrial users don’t care about abstract normalization next year if shipping routes are suddenly compromised now. And when a corridor as critical as the Strait of Hormuz becomes uncertain, the value of prompt barrels rises far more quickly than the value of distant barrels.

That distinction matters enormously, because the shape of the curve often tells me more than the level of oil itself. A market in backwardation this steep is telling us that today’s panic is real, but that investors are still reluctant to fully extrapolate it into a lasting scarcity regime.

In other words, the market is still caught between two competing beliefs. One belief says this is acute chaos. The other says the world will normalize before the disruption infects the longer horizon. That tension is exactly where the opportunity and the danger both sit.

History reminds me that when energy shocks begin this way, the first cross-asset correlation to show up is often brutally clear. Oil moves up. Risk assets begin to wobble.

During the First Gulf War, WTI rose 117% and Brent 132% during the main stress window.

Over the same period, the S&P 500 fell 20%, the Nasdaq dropped 31%, the FTSE 100 lost 14%, and the Nikkei fell 32%.

Bond markets offered another layer of information: the US 10-year yield rose 48bps, Germany’s 10-year rose 64bps, and Japan’s 10-year rose 112bps, while the US 2-year yield fell 14bps.

To me, that is one of the clearest examples of how a geopolitical oil shock travels through markets. Equities begin pricing margin pressure and weaker growth.

The long end of the bond market begins to worry about inflation, risk premia, and fiscal strain. The very front end starts to sense that an inflation shock can become a growth shock surprisingly fast.

That is why I find it too simplistic to say “oil is up, therefore inflation is back.”

The truth is more subtle, and that subtlety matters. If this remains a short disruption, the front end of the curve can stay stressed while longer-term inflation expectations remain relatively contained.

If the disruption lasts days or a few weeks, markets may eventually decide that the move is violent but temporary. If, however, the disruption extends into several weeks or even months, and if deferred crude starts moving from the mid-$60s toward the $75 to $85 range, then the market is no longer pricing a timing problem. It is pricing a structural problem. That is the threshold I care about most.

🔄 A market rediscovering the physical economy

The more I study this episode, the less I think it is only about war. I think it may also be about the financial system rediscovering the importance of the physical economy after years of acting as though the producers of real-world necessities had become secondary characters in the investment story.

When I look at the comparison between the technology sector in the S&P 500 and the combined weight of energy and materials, I don’t just see lines on a chart. I see decades of market preference laid bare.

For years, capital flooded toward asset-light businesses, software platforms, digital networks, and models that seemed capable of scaling with minimal physical intensity.

Meanwhile, the industries that extract, refine, transport, and secure the hard inputs of the global economy were under-owned, under-loved, and often underfinanced.

It all made sense in the world investors thought they lived in: a world of abundant liquidity, low inflation, efficient trade routes, cheap energy, and minimal geopolitical premium on resilience.

But that world is changing.

The one we are moving into seems to require more of everything that the physical economy provides and more of everything markets neglected for too long.

We need more electricity, more copper, more steel, more critical minerals, more LNG capacity, more grid investment, more industrial redundancy, more energy security, and more capital expenditure in sectors that had been treated like relics of a previous era.

AI may look digital on the surface, but beneath that surface it is an electricity story. Electrification sounds clean and futuristic, but it is also a metals story.

Reindustrialization may be sold politically, but economically it is an energy and materials story. Deglobalization is often described as a geopolitical concept, yet for investors it may become one of the most inflationary and resource-intensive concepts of all.

That is why I believe this moment may be bigger than a geopolitical shock.

It may be part of a broader structural rotation in how the market values scarcity, security, and real productive capacity. After the 2000 tech bubble, energy and materials went on to outperform for much of the following cycle.

Into the 2003-2008 commodity supercycle, hard assets and the companies tied to them became leadership groups because global demand outran available capacity.

Today, the backdrop is different, but in some ways even more powerful. This time, commodities may matter not only because growth is strong, but because supply is tighter, geopolitics is rougher, and national security is forcing governments and corporations alike to pay more for resilience.

I don’t read that as an argument that technology must collapse. I think that conclusion would be too theatrical and too shallow.

What I do read in it is a warning that the old assumption - that markets can keep rewarding the consumers of resources while starving the producers of resources - is becoming harder to sustain.

At some point, the world reminds us that semiconductors, data centers, military systems, electric grids, and industrial policy all sit on a foundation of raw materials, transport, power, and extraction.

When capital finally begins to flow back into industries that were ignored for years, the repricing can be much larger and much longer than most investors initially imagine.

That is why this entire oil episode resonates with me as more than a crisis. It feels like the real economy asserting its relevance again.

🌾 Where macro becomes human

At the same time, I think it’d be a mistake to respond to this shock with a purely mechanical inflation narrative.

One of the most important lessons from the past is that not every oil shock behaves the same way. A demand-driven rise in oil is very different from a supply-driven rise in oil.

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Dear investors,

There are weeks when the market feels like a machine, and there are weeks when it feels like a mirror.

A geopolitical shock hits the tape, energy prices jump, narratives spread faster than facts, and suddenly every portfolio, every conviction, every time horizon gets tested at once.

In moments like this, I always remind myself of something simple but important: when uncertainty rises, the market doesn’t just price information - it prices emotion, positioning, and forced behavior.

That is why, this week, I didn’t want to write you another headline-driven note.

I didn’t want to pretend certainty where certainty doesn’t exist. I didn’t want to build a full macro thesis on news flow that may look different in twelve hours.

Instead, I wanted to do what I believe creates real edge for us as investors: go back to the charts, respect the sequence, and let the cross-asset story emerge.

I reviewed the charts I’m going to share with you today, and the more I looked at them together, the clearer the message became.

To me, they aren’t showing nine separate observations. They are showing one connected narrative. An energy shock is creating a near-term inflation pulse. That inflation pulse is contributing to a tactical dollar squeeze. The dollar squeeze is colliding with crowded positioning. And all of this is happening while a much larger global equity rotation is quietly unfolding beneath the surface, at the exact same time that the US bull market enters a more mature, more selective phase.

The short-term move is loud. The structural transition is quieter. But both are real, and both matter.

🛢️ The shock begins with energy

I want to begin where I always try to begin in a week like this: with the most basic economic transmission mechanism.

The Goldman chart on real GDP sensitivity to a 10% rise in oil prices is, in my view, the right foundation for everything that follows because it immediately forces us to move beyond lazy labels.

I often hear investors say that emerging markets are “commodity-heavy,” and therefore a rise in commodity prices should be broadly positive for EM.

But the chart tells a more intelligent story. A 10% increase in oil prices still acts as a negative growth shock for a large share of the emerging world.

That isn’t a contradiction. It is macro reality.

Yes, many EM economies are linked to commodities, but many of them also consume commodities intensively relative to GDP, and they are often more exposed to the indirect consequences of an energy shock than the headline narrative suggests.

A rise in oil doesn’t only affect trade balances. It tightens financial conditions, pushes inflation higher, weakens consumers, raises uncertainty, and slows external demand.

In other words, even in countries with commodity exposure, the second-order effects can overwhelm the first-order benefit.

What matters even more to me is the dispersion across countries.

Brazil and Russia stand out as notable exceptions, and that is a critical reminder that “EM” isn’t a macro position by itself. It is a basket of very different economies with very different sensitivities, trade structures, currencies, and policy constraints.

In past energy shock windows, I have repeatedly seen this dispersion appear first in FX and local rates, not in equity indices.

Oil-importing EM currencies have often weakened by around 3% to 8% over the following 1-3 months, while commodity-linked FX has tended to hold up materially better.

Local bond markets, meanwhile, start pricing the inflation-growth tension before equity narratives fully catch up.

That sequencing matters for us because it tells us where to look first when the shock is still fresh.

If oil remains elevated for more than a few sessions and starts behaving like a regime rather than a spike, I would expect the market to continue widening the gap between oil beneficiaries and oil importers inside EM.

I don’t think that divergence gets priced all at once. It usually unfolds in layers - currencies first, then rates, then earnings revisions, and only later the broader equity narrative.

This is the first key lesson of the chart pack for me: when oil moves, the real question is not “who produces commodities?” The real question is “who can absorb the shock?” That is where the performance gaps usually come from.

🔥 From commodities to inflation expectations

Once I move from the Goldman chart to the BCOM versus US 10-year breakevens chart, I feel like the regional story becomes global almost immediately.

The Bloomberg Commodity Index (BCOM) has moved higher aggressively, but US 10-year breakevens have not fully followed.

When I see a gap like that, I don’t interpret it as a curiosity. I interpret it as a tension the market is unlikely to tolerate for long.

In energy-led inflation regimes, broad commodities and breakevens have usually maintained a fairly strong positive relationship, often in the +0.6 to +0.8 correlation range on rolling windows.

We saw this dynamic in 2020-2022, when commodities surged and inflation expectations eventually repriced higher.

We also saw the mirror image in 2014-2016, when weaker commodity prices were associated with a meaningful compression in breakevens.

So the way I read the current divergence is very simple.

Either breakevens eventually catch up, or commodities retrace and the market decides the shock is temporary. In previous episodes when the market came to believe the commodity move was persistent rather than transitory, breakevens often repriced by something like 20 to 50bps.

I’m not saying that exact move must happen now, but I’m saying this kind of gap tends to resolve - and when it resolves, the consequences usually spill well beyond inflation commentary.

Because this isn’t only an inflation chart. It is also a chart about duration risk, real yields, and equity leadership.

If breakevens rise while real yields remain relatively contained, the market can digest the move in one way. If breakevens rise while real yields rise too, the pressure on duration-sensitive assets becomes much more immediate. And in a market where so much has been built on assumptions about rate stability, that distinction can matter a lot.

This is why I’m careful with “all-clear” narratives whenever commodities are moving this quickly. A commodity chart can look like a side story right up until it begins to reshape the way the market prices inflation persistence.

And from there, it is a very short step into currencies.

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When the news flow turns this intense, I feel the same temptation everyone feels: to look at the latest headline, the latest quote, the latest dramatic update, and assume the market must now move in a straight line from fear to collapse.

But over the years, I have learned to slow down exactly when the world speeds up.

Because war headlines are loud, emotional, and immediate. Markets are different. Markets speak in probabilities, transmission channels, positioning, and repricing.

They rarely move on the headline alone. They move on what the headline changes in the economic path, in the inflation path, and in policy expectations.

That is why, in moments like this, I don’t start by asking whether the news is “bad.”

I start by asking a different question: what is the market pricing already, what is it only fearing, and what is the mechanism through which this fear can become a real macro shock?

The sequence below today I shared is not random to me.

I put them in that order because I believe the order tells the actual story. It begins with panic, yes, but panic is only the first chapter. Then comes transmission. Then positioning. Then repricing.

And if we read those chapters in the right order, we can avoid the biggest mistake investors make in geopolitical moments: reacting emotionally to the first move while the market has already started trading the second and third move.

The chart of “Wars & Markets”, is where I always begin because it forces me to remember how markets behave under uncertainty.

Across the conflicts shown, the average recovery from the local panic low is roughly +27%, and in some cases the rebound reaches +60% to +67%.

I don’t read that as “war is bullish.” I read it as a reminder that the initial reaction to war is often an overshoot driven by uncertainty, de-risking, and worst-case scenario pricing before the economic damage is fully visible.

I have watched this pattern repeat many times. The first move is fear, liquidation, and forced reduction of risk. In that phase, correlations are often textbook: equities fall, volatility rises, government bonds catch a safety bid, and safe-haven currencies strengthen.

In many historical risk-off windows, the 10-year Treasury yield can decline by roughly 20 to 60bps as capital runs toward safety.

At the same time, currencies like JPY and CHF often strengthen, while higher-beta currencies and several commodity-importing emerging market currencies come under pressure.

But geopolitical episodes are rarely static. This is where many investors get caught.

They assume the first correlation regime will persist. Sometimes it doesn’t. If oil begins to rise meaningfully, the market can transition from a simple “flight to safety” regime into an inflation-repricing regime. That is the moment when bonds stop behaving like a clean hedge and cross-asset relationships become more complex. And that is exactly why I don’t stop at the headline or the index.

I watch the correlations. I watch the sequence. I watch the market move from panic to transmission.

🕰️ What history keeps teaching me about war

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Dear Investor,

Most investors are looking at the headlines.

Very few are looking at the structure underneath them.

And right now, that structure is where the real story is.

Over the last few weeks, I’ve gone back to the same charts repeatedly - not because I needed more confirmation, but because the message became impossible to ignore once I stopped reading them individually and started reading them as one connected signal.

What I’m seeing is not just another macro update.

It’s a market that still looks strong on the surface - while, underneath, capital is crowding into the same trades, correlations are being monetized aggressively, liquidity is doing the heavy lifting, and fragility is quietly building in places most investors are not watching.

That combination is exactly where PRO investors below can gain an edge.

Because this isn’t the type of market that rewards people who only follow price after the move. It rewards those who can identify where the pressure is building before it becomes obvious, where liquidity is masking risk, and where market structure can amplify the next rotation.

So in this note, I’m not giving you 10 disconnected chart comments.

I’m giving you a single macro narrative, so you can see how valuation, Fed tone, liquidity, funding stress, labor-market shifts, FX dynamics, and volatility positioning are interacting right now - and what that likely means for positioning in the weeks ahead.

If you read this carefully, you won’t just understand what happened.

You’ll understand what the market may be underpricing next.

📈 The hidden cost of expensive confidence

I want to begin with the chart on Forward P/E US vs World ex-US, because valuation is where the market reveals what it believes deserves trust.

The latest readings are striking: the S&P 500 is trading at roughly 26.9x forward earnings, while MSCI World ex-US is closer to 19.0x. That still leaves US equities at about a 40% - 42% valuation premium to the rest of the world.

Yes, global markets have narrowed the gap in recent weeks, and yes, that matters.

But I think we need to be very honest about the starting point: a premium of this size isn’t just a growth premium.

It is a confidence premium. Investors are paying up not only for earnings power, but for perceived business quality, visibility, scalability, and the belief that the dominant US leadership cohort - especially big tech - should continue to command structurally higher multiples than almost everything else.

That may continue. But when a market trades at this kind of premium, it also becomes much less forgiving. The market no longer needs a collapse to reprice.

It only needs the story to become slightly less perfect.

And this is where the capex question becomes central. If large technology companies continue increasing capex aggressively to defend AI leadership, infrastructure, and distribution advantages, they may still grow, they may still dominate, and they may still remain outstanding businesses.

But investors may gradually start valuing more of that leadership cohort less like pure capital-light software franchises and more like capital-intensive compounders. That doesn’t kill the bull case. It changes the multiple framework.

Personally I don’t think the US premium needs to crash for this to matter. If the premium simply compresses from roughly 40% toward 25%-30% - still elevated, still a premium - the consequences could be meaningful. We could see a phase where international equities outperform on a relative basis even if US indices keep rising. Or we could see a broader US index de-rating if earnings revisions are not strong enough to carry the weight of current multiples.

When I think about history, I keep coming back to 2003-2007, when non-US equities materially outperformed in a more globally synchronized cyclical expansion.

That doesn’t mean we are repeating that exact period. It means valuation spreads this wide have a habit of becoming less stable once growth broadens beyond the most expensive leadership pocket.

On the other hand, 2023-2025 showed the opposite dynamic, with US leadership extending and the premium widening further as investors paid aggressively for quality, scale, and AI leverage.

The lesson for me is not that valuation tells us timing. It rarely does in the short run. The lesson is that valuation changes the distribution of outcomes. The bigger the premium becomes, the more the market needs reality to keep validating it, and the more vulnerable relative performance becomes if the narrative loses even a little momentum.

This is also why I’m paying attention to real yields in the same breath.

US real yields and long-duration equity multiples tend to move with a negative relationship. That matters much more when the S&P is trading at 26x-27x forward earnings than when it is trading at 16x-18x.

When valuations are already high, a small move in discount rates can have a disproportionately large effect on sentiment and leadership.

And while that valuation story is unfolding, the Fed enters the picture - not as a clean directional driver, but as the force that shapes how much room the market has to keep telling itself a smooth macro story.

The FOMC sentiment chart captures this shift beautifully.

The tone in the January minutes wasn’t a full hawkish pivot, and it wasn’t panic. To me, it was something more subtle and more important: the Fed signaling that the path to durably achieving 2% inflation could be slower and more uneven than the market’s most optimistic assumptions.

That is the “last mile” problem.

The first phase of disinflation is usually easier. Base effects help. Goods normalize. Supply chains heal. The later phase is where the process becomes messy: shelter, wages, policy frictions, tariff effects, and expectations start to matter more. Markets want a clean line. Central banks are warning us the line may look more like a staircase.

Even if the policy rate stays in the 3.5%-3.75% range for now, I think the more important issue is the reaction function.

If inflation proves sticky in the wrong categories while growth stays resilient, markets may have to keep repricing the probability and timing of cuts.

If growth weakens faster, cuts may come - but under a softer earnings backdrop, where rate relief is partly offset by growth anxiety. That is why I keep repeating this to myself and to you: cuts aren’t automatically bullish; the reason behind the cut matters more than the cut itself.

We have seen versions of this before. In 1994, in 2018, and in several windows across 2021-2024, periods of hawkish repricing or “last-mile” inflation anxiety often produced a familiar cross-asset pattern: 2-year Treasury yields repriced higher, duration-sensitive equities came under pressure, and the dollar firmed.

In practice, the market doesn’t need a dramatic shock. A 10-25 bps move in the 2-year Treasury yield over a few sessions can be enough to trigger multiple compression in growth-heavy sectors when positioning is extended.

This is where cross-asset correlation helps us think clearly. Hawkish Fed repricing tends to correlate positively with front-end yields, often positively with DXY, and negatively with long-duration equity multiples. When those relationships begin moving together, markets can reprice much faster than the headlines suggest.

And yet - this is the key point - the market has remained resilient. Why? Because the next chart answers that question in one line.

Global liquidity.

The chart below showing global money supply and global equities is, in my view, the bridge between “why valuations look stretched” and “why prices still keep getting support.”

Global money supply is now around $120 trillion and growing at approximately a 12% pace. When I look at that, I don’t find risk-asset resilience surprising. I find it logical.

Liquidity is not the only driver of markets, but it is often the most underappreciated driver in the short and medium term.

When liquidity is improving and financial conditions are not restrictive enough to create broad stress, markets can stay expensive longer than many valuation-based frameworks expect. That doesn’t make valuation irrelevant. It just means liquidity can dominate the timing.

The historical pattern in that chart is familiar and incredibly useful.

When global money supply growth turns positive and accelerates, equities tend to respond with a lag.

When liquidity growth fades, markets become more vulnerable to de-rating, spread widening, and correlation shocks. I think this is why so many investors feel intellectually “right” but operationally early in liquidity driven regimes.

The clearest modern example remains 2020-2021. Global liquidity accelerated sharply, and global equities staged one of the strongest rebounds in modern history from the pandemic lows.

By contrast, 2022 brought tighter conditions, weaker liquidity momentum, and a broad drawdown in global risk assets, including a meaningful decline in MSCI ACWI. The lesson isn’t that liquidity explains every move. The lesson is that it powerfully shapes the environment in which other variables matter.

And this relationship often works through lagged correlation, not same-day reactions.

I don’t expect ACWI to move in lockstep with each weekly liquidity estimate. I expect liquidity trends to shape the background conditions that determine whether dips are shallow or deep, whether spreads widen briefly or persistently, and whether leadership broadens or narrows.

So yes, I still see support for risk assets here. As long as global liquidity growth remains in the high single digits to low double digits, something like 8% - 12%, the market can keep finding buyers on weakness.

But when liquidity is carrying more of the burden, it also means we have to watch very closely for the places where the system is quietly telling us that the underlying plumbing is becoming less comfortable.

🏦 The currencies that move before equities do

The Standing Repo Facility chart is the kind of chart I never treat as a footnote, even when the immediate explanation looks benign.

Demand for the Fed’s SRF surged to $30.5 billion, the 4th-largest operation since the 2020 pandemic, split between roughly $18.5 billion in Treasuries and $12.0 billion in MBS.

The calendar-squeeze explanation is plausible. Holiday-related settlement timing can absolutely create these distortions. We’ve seen similar patterns around quarter-end, year-end, and other balance-sheet-sensitive dates.

But the reason I pay attention is simple: repo markets are often where stress first appears, not where it first becomes obvious.

A one-off spike is a data point. I treat it that way. But repeated spikes outside obvious calendar squeezes become a pattern, and once it becomes a pattern, I stop asking “is this technical noise?” and start asking “what balance-sheet constraint is the market trying to signal?”

That is why September 2019 still matters to me.

It reminded everyone that front-end funding markets can force a policy response faster than most macro narratives anticipate.

Then March 2020 gave us the extreme version, when funding stress, equity liquidation, and Treasury market dysfunction collided at the same time. I’m not saying we are reliving those moments.

I’m saying the function of the signal remains the same: persistent funding stress tends to correlate with higher front-end volatility, greater sensitivity in rate markets, and a more fragile backdrop for risk assets.

There is a cross-asset rhythm here that I always watch. If funding stress persists, we often see signs of tighter dollar liquidity, weakness in funding-sensitive segments, and more fragile relative performance in areas like small caps and financials.

Not every repo spike causes that chain reaction - but when it starts, the chain reaction is usually visible in funding proxies and rate volatility before it is obvious in the S&P 500 headline.

At the same time, while the market is trying to read funding conditions, it’s also trying to read the labor market with outdated heuristics - and I think that is creating a lot of unnecessary confusion.

The labor-market breakeven chart may be one of the most important charts in the whole package because it changes how we should interpret payroll data.

The estimated breakeven rate of household employment growth needed to keep unemployment stable has fallen to roughly 50,000 jobs per month, down from roughly 200,000-250,000 in 2023. That is a collapse of around 75%-80% in the breakeven threshold.

That isn’t a small adjustment. That is a structural shift.

If labor force growth is slowing - and falling immigration is one major reason - then the economy simply doesn’t need the same monthly job creation to keep unemployment from rising. That means job growth can look soft by old standards while still being consistent with a relatively stable labor-market equilibrium.

This helps explain something that would have confused many investors using older frameworks: periods in mid-2025 where household employment growth was weak or near zero, yet unemployment remained relatively stable. If we keep applying old thresholds to a changed labor-force regime, we’ll keep mislabeling recalibration as deterioration.

I’ve seen this in markets before, across other macro series. Investors become anchored to a number because it worked for a previous regime, then the underlying structure changes and that number loses explanatory power.

I think payroll interpretation is moving into that category. The old reflex - “sub-150k payroll equals immediate growth scare” - has become much less reliable unless it’s confirmed by unemployment, wages, hours worked, and participation.

History supports that nuance. In slower labor-force-growth periods, including parts of 2017-2019, payroll numbers that looked only moderate by previous standards were still consistent with stable unemployment and supportive risk-asset performance.

In faster labor-force-growth regimes, similar numbers would have been more concerning. The difference was not sentiment. It was the structure of the labor supply dynamic.

This is why I now care more about the correlation cluster around labor data than the payroll print in isolation. If payroll is soft but unemployment is stable, hours worked aren’t collapsing, and wage pressures remain sticky, the market’s reaction in yields can be very different from what many expect.

On the other hand, if we start seeing a rise in unemployment, weaker hours, softer wage growth, and declining participation together, the signal becomes much more powerful.

And this is where the global story widens, because while investors are recalibrating labor-market thresholds and watching repo usage, the currency market is already repricing policy uncertainty - starting with the yen.

The yen chart is a reminder that FX often moves first.

The yen weakened sharply after reports that Prime Minister Sanae Takaichi opposed further BoJ rate hikes in discussions with Governor Kazuo Ueda, with the move reaching about -1.0% versus the US dollar and leaving the yen as the weakest performer among G10 peers in that session.

At the same time, the market was pricing only around a 59% chance of a BoJ hike by the April meeting, with a full 25bp move not fully priced until around July.

I don’t read this as just a Japan story.

I read it as a global macro signal because the yen sits at the heart of funding conditions, carry trades, and cross-border positioning.

In the short run, yen weakness can support risk appetite by reinforcing delayed BoJ normalization and easier funding assumptions. But that same move can also build fragility if it becomes too consensus and investors start treating it as a one-way trade.

This is one of the paradoxes of macro: a move can support markets and increase future risk at the same time.

The 2022 experience still offers a strong reference point.

As US-Japan yield differentials widened, USD/JPY rose sharply, the yen weakened toward multi-decade lows, and Japanese exporters benefited from the translation effect.

But the same setup also made the system highly sensitive to policy rhetoric, intervention risk, and rate repricing. When yen reversals come in risk-off windows, they often come faster and harder than equity investors expect.

That is why I treat the yen as a macro pressure gauge, not just a currency pair.

USD/JPY tends to track yield differentials, yen weakness can support exporter-heavy Japanese equities, and abrupt yen strength during risk-off periods often correlates with pressure on carry and broader risk assets.

The signal is rarely isolated.

And once we move from the direction of the yen to the scale of yen-linked funding, the story becomes even more important.

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Dear Investor,

There are mornings when one single print doesn’t just move markets - it reveals them.

You can literally watch the narrative flip in real time: screens go from tense to euphoric, talking heads suddenly sound “certain,” and the phrase “soft landing” stops being a hypothesis and becomes a shared belief.

February 19, 2026 is one of those mornings.

But here’s the part most investors will miss - and the part you can’t afford to miss if you’re reading this as a PRO. Because the real story isn’t the CPI headline.

The real story is the divergence sitting underneath it - the kind that only shows up a few times per cycle, right before leadership changes and portfolios get repriced.

History is doing what it always does.

It’s leaving clues in the data while most people celebrate the surface.

So I’m going to show you all my analyses through the charts and considerations below, keeping every number intact - but I’ll connect them the way the market actually works: what cooled, who is absorbing the pressure, and where capital is already rotating before it becomes obvious.

My goal isn’t just to inform you. It’s to make sure you feel the regime shift while it’s still early - because once everyone agrees on it, the opportunity is usually gone.

✈️ The Print, the Relief, and the Last Mile

The headline was a gift to risk assets.

Headline inflation printed at 2.4% YoY against an expectation of 2.5% - the lowest since May - while Core inflation came in at 2.5% YoY, the slowest pace since March 2021.

After the “hot” jobs report earlier in the week, this was the kind of release that makes the market exhale.

And yet, when I stare at the decomposition, I don’t see a finish line. I see a final stretch.

The chart makes the composition crystal clear.

Core services are still the sticky anchor, contributing 1.787pp to the CPI YoY, while Core goods contribute 0.216pp, Food contributes 0.393pp, and Energy is slightly negative at -0.009pp.

Inflation is cooling, but it’s cooling in the easiest places first. Goods and energy give you the quick wins.

Services are the last mile of the marathon, and the last mile is where most people get humbled.

That’s why the market response makes sense but also deserves discipline.

If services continue to glide lower, the easing path becomes more credible, and markets behave the way they’ve behaved in classic soft-landing templates: they re-rate.

I always like to anchor this in market memory because it’s where the correlation becomes tangible.

In 1995, the year many investors still treat as the clean “soft landing” blueprint, the S&P 500 delivered +37.58% total return.

In 2019, another year where disinflation and policy easing drove confidence, the S&P 500 delivered +31.49% total return.

Different worlds, different catalysts - same behavioral pattern: when inflation stops threatening policy, equities tend to expand multiples.

Those years weren’t simply “inflation down, stocks up.” They were years where the internal structure of the economy determined what kind of rally you got and how fragile it became.

Which is why the next chart matters so much.

🧊 The Consumer’s Quiet Stress, and Why It Changes the Ending

If CPI is the market’s relief, household balance sheets are the market’s suspense.

The savings picture is moving in the wrong direction.

Personal savings have dropped by -$469.2bn, a decline of -37% since April.

The personal saving rate has tumbled from 5.5% in April to 3.5% in November, the lowest since 2008 if we exclude the unusual COVID distortions of 2020.

At the same time, delinquency rates across loans - mortgages to credit cards - have risen to 4.8% in Q4, the highest since 2017.

When I read those numbers, I don’t immediately shout “recession.”

I read them as a narrative shift: the economy can still look fine in aggregates while the margin of safety disappears for millions of households.

This is the K-shaped economy in real time - where resilience is not evenly distributed, and where a soft landing in inflation can coexist with rising stress in cash flows.

And that’s where markets become tricky. In soft-landing phases, equities can keep going, but leadership usually becomes more selective.

Balance sheets matter more. Pricing power matters more. The rally becomes less about “everything up” and more about “the right things up.”

The historical anchor here is not meant to be dramatic - it’s meant to be honest about correlations.

When household stress becomes systemic, markets stop forgiving it.

In 2008, the S&P 500 returned -37.00%. I’m not calling 2008. I’m reminding you that the correlation between household fragility and market vulnerability is one of the few that remains brutally consistent across eras.

While savings are falling and delinquencies are rising, the commodities complex is not rolling over. That combination can sound contradictory until you see it for what it is.

The consumer is straining, but the global cycle is still pushing on real assets, and the dollar is losing some of its grip.

🧱 Commodities, EM Flows, the Yuan, and Capital Leaving the US

The commodities complex got caught in the crossfire of positioning last week - margin calls do what they always do - but structurally the chart still looks solid.

This matters more than people admit because commodities are the bridge between inflation, FX, and global liquidity.

When commodities refuse to soften while CPI cools, I interpret it as a signal that the inflation impulse isn’t simply collapsing - it’s shifting.

It can mean global demand is firmer than investors assume, or that a softer dollar is feeding into broad price dynamics.

And it can mean that the path from 2.4% toward 2.0% is not linear, especially with Core Services still doing most of the work.

Market memory makes this correlation easy to visualize.

In periods when inflation sensitivity and real-asset demand dominate, broad commodity exposure tends to perform meaningfully.

As a proxy, GSG returned +15.57% in 2021 and +22.06% in 2022. Those weren’t calm years. They were years when markets relearned that real assets can become leadership, not just hedges.

Then the next chart adds the flow dimension.

Global Emerging Markets (GEM) equity funds are seeing record inflows since the start of the year, with early-year dynamics that resemble the strongest historical seasons in the post-2004 era.

I treat this as slow capital changing its mind. EM isn’t just a geography; it’s a macro expression of a weaker USD, firmer commodities, and better global liquidity.

If you want a clean historical template for the correlation between EM flows and performance, 2017 is instructive.

In that year, EEM returned +37.28%, while the S&P 500 returned +21.83%. The mechanism is familiar: the dollar weakens, global risk appetite broadens, and under-owned markets re-rate faster than investors expect.

And then comes the FX confirmation.

The Chinese Yuan has strengthened to 6.91 per USD, the strongest since May 2023.

It’s on track for its 7th consecutive monthly gain, the longest streak since 2020 - 2021, and it’s up roughly ~5% since 2025. It has also been one of the strongest performers in Asia since September.

A strengthening yuan is not just a currency story - it’s a macro message. It tends to ease financial conditions across parts of Asia, reduce the “China stress premium,” and support broader EM risk appetite.

It also aligns with the narrative that Chinese regulators have advised banks to limit purchases of US Treasuries and encouraged institutions with high exposure to pare positions down.

If that is even partially true, it fits the broader theme: a weaker USD, improving non-US risk appetite, and gradual diversification away from US duration.

Then the flow chart on global equities makes the regime shift explicit.

Investors are rotating out of US stocks at a historic pace. International equity funds have attracted +$104bn in net inflows YTD, which is four times the +$25bn that flowed into US funds. Developed markets have seen nearly $140bn of inflows.

This isn’t a polite rebalance. It’s a statement.

And performance already echoes it. The S&P 500 is up +16% since the start of 2025, but MSCI ACWI ex-US is up +45%.

I know the line “the era of US dominance has finished” sounds like a headline.

But what matters to me isn’t the slogan - it’s the mechanism. Flows follow incentives. Incentives are changing.

When the world starts believing in broader leadership, it usually doesn’t happen in a straight line.

It happens through volatility, skepticism, and uncomfortable transitions. Which is exactly why it creates opportunity.

But to understand how this rotation can coexist with Fed easing, we have to look at the curve.

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