Central banks have fallen behind the curve, and we are now...

Central banks have fallen behind the curve, and we are now approaching a macro inflection point that will squeeze out positioning and cause capitulation across interest rates, equities, and the global economy

Let's dig in 🧵👇

When we came into this year everyone thought the greatest economic boom would take place because of the Trump win.

We then had equities sell off and bonds rally because of the tariff risk and everyone in financial markets began to think a recession was imminent.

The entire financial industry and media has become so deluded that the only outcome they can imagine is either a recession or soft landing. They lack imagination.

Equities are down a little and they think recession, equities up a little and they think soft landing.

@EconstratPB laid this out well and has been nailing all of these moves:

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The thing people have been missing is that while equities were in a drawdown, banks were taking advantage of the opportunity and continuing to issue debt aggressively.

I laid out the entire thesis and logic for the credit cycle here:


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Every day I come in and look at my Bloomberg, there is another massive credit deal going through that is shoving more money in the economy and decreasing the probability of growth slowing.

Billions are flowing in the economy as companies hire more and more workers:

Anyone mapping economic data with any semblance of rigor will know that jobs are being added every single day:

All of the real time data is saying the same thing

Here is the problem though: central banks are either acting in total ignorance or falling behind the curve in a massive way. When central banks fall behind in a credit cycle, bond markets crash because growth and inflation rise.

As credit spreads have fallen, the 10s30s curve has bear steepened or made a steepener twist. What does this mean? It means that the market is pricing in higher nominal GDP, NOT a recession

I already laid out how this is a massive risk to inflation and everyone calling for recession is missing the actual datapoints around WHERE the curve is going and HOW MUCH credit is being shoved into the system:

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This is exactly why TLT keeps going off a cliff:
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And why the short bond trade I published continues to print:
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This is also why CL keeps rallying even through the CPI print this morning:
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Central banks like the ECB are making the biggest mistakes because there have been massive fiscal bills pushed through in Germany and they're still cutting interest rates!

This is functionally like 2021 where they are easing into accelerating growth

European banks continue to melt up and hit all time highs before US equities

The ECB has been cutting rates because lower energy prices have helped them but services inflation in the Eurozone are still elevated and accelerating on a MoM basis:

This is why 30 year swaps are beginning to rally and push higher in the Eurozone. The ECB has made a mistake and the long end is going to push up to price the higher growth and inflation

This is the same thing happening in the US right now as 30 year rates are pushing higher post the CPI print this morning.

Like I laid out in the spaces yesterday, central banks are going to face a reckoning for their actions as rates on the long end blow out to the upside:

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What does this mean for equities? We continue to be skewed to the upside in equities. I have been laying out the bullish case for equities for some time now and we are now seeing the full capitulation of all the bears who were betting on recession.

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What are the trades in this environment?

Short bonds across every major country, long equities, long crude (and XLE calls), long copper (FCX calls too), long silver, long Bitcoin, long gold, long the Mexican Peso, long Mexican equities, long AUDJPY, long the Brazilian Real.

Who do you want to follow in this market regime to consistently have a clear read of the things taking place?

@EconstratPB
@EffMktHype
@agnostoxxx
@MacroTactical
@countdraghula
@spaghettilisbon
@prometheusmacro
@conksresearch
@patrick_saner
@Dcpcooks
@lord_fed
@AlphaPicks

@fejau_inc
@qthomp
@iv_technicals
@Citrini7
@eliant_capital
@PharmD_KS

And then of course @SoundDobad for meme coverage

I will be publishing a comprehensive report with precise trades on all of the points I noted above. All of the research, trades and educational primers are laid out here:
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