Closing Thoughts for the Week

It wasn’t the huge rally that I thought it might have been, but it was a rally nonetheless. Market bulls should still be encouraged by how last week looked. Over the past century, almost every extended risk asset recovery hasn’t started until the Fed has made a dovish pivot.

The U.K. pension market came THIS close to getting wiped out after surging gilt yields triggered margin calls and a near collapse. The real risk in the short-term isn’t necessarily an economic downturn, it’s a fundamental systemic breakdown. There are rumblings that a major investment bank is on the brink of collapse. A government intervention could be the catalyst for a short-term melt-up rally.

It may sound like hyperbole, but it’s looking like something is really broken here. Jerome Powell acknowledged that a recession in the U.S. is probably imminent and won’t do anything to stop it. There’s just so little optimism out there. Who knows how high the dollar goes here. I still remain very disturbed by U.S. Treasury yields.