A “Big Picture” Perspective of What’s Coming This Fall
Over the last week, I’ve outlined that the stock market is preparing for a large move down.
To provide some insight into why this is, today I’d like to give a “Big Picture” perspective of what’s happening in the financial system.
First and foremost, you need to understand that for central banks, the single most important thing is the BOND market, not the stock market.
Yes, central banks want stocks to rally because this distracts investors from larger, more systemic issues. But the bond market is their primary focus.
As I outlined in my bestselling book The Everything Bubble: The Endgame For Central Bank Policy, the bond market is what allows governments/countries to continue to finance their massive social spending programs. Without their ability to issue cheap debt, most countries would go bust in a matter of weeks.
Think of it this way: If stocks fall a lot, some investors go broke. But if the bond market falls a lot, entire countries go bust.
This is precisely what started to happen in 2018.
At that time, the single most important bond in the world, the 10-Year U.S. Treasury, began to fall in price, forcing its yield higher (when bond prices fall, bond yields rise). The situation became so dangerous that the yield on the 10-Year U.S. Treasury actually broke out of its 35+ year downtrend.
This is what caused the Fed to panic. It quickly realized that if Treasury yields continued to rise, it was only a matter of time before the U.S. experienced a debt crisis.
And so, the Fed let stocks crash in December to force money into the perceived “safe haven” of the bond market. The Fed also stopped talking about raising interest rates and started talking about lowering them. Bond yields tend to track where the Fed moves interest rates, and the Fed was desperate to get bond yields lower.
As the below chart reveals, thus far this strategy has worked.
I bring all of this up because every central bank on the planet is currently doing what the Fed did back in late 2018: panicking and attempting to force capital into bonds.
Today I’ve focused on U.S. Treasuries, but every major nation – whether it be Germany, Japan, Switzerland, or the U.K. – has its own central bank that is desperate to force its country’s bond yields lower.
And this has set the stage for one of the greatest profit making opportunities of all time.
You see, as central banks ease monetary conditions to force capital into their bond markets, it’s going to result in EXTREME volatility in the currency markets.
For anyone who knows how to “get in, make money, and get out” this will represent one of the greatest trading opportunities in history.
This is why I’ve spent the last six months developing a proprietary trading system, Alpha Currency Profits, to do exactly that.
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Editor, Money & Crisis