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The fuel for the rally comes neither from rates, nor from fundamentals, nor from central bank liquidity
It stems from a mix of fiscal stimulus being channelled into fund flows and financial sector leveraging
The resultant mix of too much money chasing too few assets both suppresses risk premia and postpones credit events – to a point
But it remains critically dependent on the continued credibility of the borrowers and the system
The recent “bond rout” would be better described as a long-end bond technical
It reflects dwindling pension demand more than existential fears around inflation or debt sustainability
Governments should reduce their long-end issuance accordingly
Investors should continue to hold steepeners until they do – without necessarily being short duration
The more Trump exerts personal control over US organs of state, the more the US’ real power is eroded
The main mystery is why this is still not being priced into markets
Part of the answer revolves around the amorality of capitalism, and prospects for more easy money
But much is attributable to the extreme and abrupt nature of credit repricings
Commentators argue increasingly that tariffs matter little, and for the return of US and tech exceptionalism
But this risks retro-fitting the explanation to the price action
An examination of the monetary data points to the exceptional way in which fiscal stimulus has been fuelling equities
Free clip from 8 Jul webinar
The single greatest force driving modern economies, society and politics is scalability
It is the common narrative underlying the dominance of big tech, through to the teen mental health crisis and the rise of political polarization and populism
Markets tend to treat scale as a largely linear concept
But human systems change character at scale – and ultimately have breaking points
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