Still in the correction phase as the seasonality accounts for it. Dollar and 10-year Bond finally waking up to the strong opinion that INFLATION combined with economic activity have been strong and seems to be consolidating with a possible breakout event in next few months. In other words, the street had a wet dream about rate cuts this year, one after the other. The FED might actually do so to make sure the economy is accelerating during election period. If they do, we can be assured of a really big jump in inflation right after. Either way rate cuts will cause a disaster while no rate cuts will build towards a disaster. The economy is acting as if the current rates are no bother.
To be clear we had a bank run not seen since the 1920's because of the HUGE BETS by banks that rates were going to be lower. The current situation has not changed, and the laws to this day do not prevent a future debacle. Under the surface debt strain is huge. The FED knows this and wants any excuse to lower rates and is stalling by presenting this scenario knowing darn well they have NO control over the future path of inflation.
On track now. Finally see the breakout from a long consolidation period. The dollar and yields are screaming. Loud and clear they do NOT see any rate cuts this year. NONE! Like i said, if the FED ignores the inflation signs and cuts anyway, I expect an initial reaction of exuberance by wall street. That just makes for a quicker more dramatic spike and crash. A condensed version of what I expect. Will the FED cut this year? Will there be any call for it based on economic activity? Doesn't really matter. Psychology is everything. Just like a Pandemic that was ignored till it no longer could be.
