What a week.

Last seven days were majestic for those who care about finance and markets. We’ve seen collapses, scandals and a lot of other black swans. It almost feels like we’re going to be flooded with black swans for the rest of the year, if not for the next 2–3 years, till the “everything bubble” busts and we start building the next phase of finance and world economy. But let me express some thoughts on where we’re headed next.

I will not go into crypto this time, because when you’re looking at the macro aspect of markets, cryptocurrencies are just a small part of it, that, in the end of the day, it doesn’t even affect the “traditional finance”. Take the Luna massacre as an example. It was the reason for the crypto meltdown we saw this week but if we zoom out, it was nothing that affected our lives… at least I hope it didn’t, for some.

Commodities seem like they’ve topped out. Fed and ECB are both kind of playing around right now, and trying to crash the prices without actual intervention, yet they raised their interest rates, but of course, this is not enough to cool down an overleveraged world economy that was built for 14 years already. However, like I said, commodities ETFs and related indices have started their bearish legs already (e.g $CRB and $AW1!).

Inflation expectation ETFs look poised to follow the same way, as the central banks have scared commodity bulls a lot lately, without doing something to bring down the prices, apart from raising rates just this week.

In my opinion, there’s a big catch though. Even if we have extreme inflation going on in the leading economies, like USA, we notice that the Dollar is rallying instead of devaluating compared to currencies with lower inflation (look at USD/CHF). Personally, I consider this as an exit rally for the investors, as they want to reduce their risk exposure from volatile assets and move to something more safe. Traditionally this is the role of bonds, but wait a second… they’re selling off like crazy and it seems like nobody is interested in them. Everyone looks at the USD as their safety resort instead of bonds. Weak economies in the EU like Italy and Greece have their government bond yields rallying like crazy, with Greek ones reaching 5% during this week. And still nobody seems to be interested. Well, fun fact here that the main buyer of these bonds is the ECB. No one else is interested in buying those ‘unsafe’ assets. But, isn’t ECB going to start tapering, hence limiting their asset buying, so they keep prices at a health level. Such an irony, right? So here’s my speculation on what is next, because the case is kind of similar in the US as well:

Central banks will realize that they need to save the bond market, before it takes down everything, and they will start QE’ing again. As a result, we’ll have more inflation in the next months. Bonds will start rallying, and it is likely that stocks, commodities and cryptos will also have their relief rally, after a brutal bearish move.

And that’s going to be the last rally before a bear market on all risk assets for the coming months, if not the next 1–3 years. A global deleverage will bring recession, unemployment hikes and scenarios that most of our parents have already lived once, if not twice, and they don’t want to experience again.

For investors, this is going to be an once-in-a-lifetime chance to place their bets on what they think that will thrive in the coming years, and the next generation of millionaires will start being born. A phoenix is born through its own ashes. It can be stocks, commodities of any form, cryptos or even high-beta currencies, like AUD and NZD, but the right decisions of the next 12 months will probably be the reason that some people will have the life they always have been dreaming of.

That’s it from me. A small thread on the current macro conditions based on how I see markets. Personally I am on a ‘saving mode’ for the rest of the year amid expectations for prices I haven’t seen since I started my active involvement with markets and finance, in general.

Time will tell if what’s being done now is the correct moves. Patience.

Take care.