The view is and has been disinflation first, then a return of the inflationary macro.
Sometimes I feel as though I write the same article over and over. But that is because the changes since 2020, and especially 2022, have been profound from a standpoint of market management.
In line with our long-standing view that the now inflationary macro would undergo its first counter-trend, an interim disinflationary trend, Treasury bonds from the shortest durations on up to the longer durations are on plan.
The chart below includes monthly dividends. The nominal bonds are all going varying versions of sideways. But when using these government debt vehicles for income and/or market indications, it's the total return that matters. Especially as the government and Fed cheapen the currency.
As a side note, I have not and likely will not touch the longest-term bonds, but per my portfolio holdings, have since 2023 held 1-3yr and more recently 0-5yr (inflation protected), and even more recently as a speculation on the interim disinflationary macro, 3-10yr. I have also held short-term Treasury bonds bought directly over the last 2-3 years for some nice income.
This article is not about bond trading or investment, however. It is about the indications of bonds on the inflationary macro. In this newer macro, bonds (the debt of entities and governments) will ultimately prove to be garbage due to the effects of inflation. They are not a long-term investment. The old "60% stocks, 40% bonds" shtick is dead, on the bigger picture.
The macro symbolically changed from disinflationary to inflationary signaling in 2022 and effectively has been dealing with inflation since the Fed and government created the most recent problem in H1, 2020, which was fatal for the gentle disinflationary days of the old macro.
However, in the markets we should be flexible to interim phases. And that is what we have today. A phase where the public is treated to a "just right" porridge of easing inflation and still-intact economy. This disinflation could range anywhere from moderate relief that the inflation picture is not a bad as it had been to full-on Goldilocks.
We are entering the runway to the mid-term elections and it is indeed convenient that the bond market is indicating a pleasant situation. Oh but, you just wait until after the elections, perhaps in H1, 2027. The next inflationary episode is not going to be like the painful previous one. It is going to be worse. It is going to be Stagflationary. It can't not be that, given that Fed and government have started to crank up the inflationary operations already, within an already inflationary macro.
Here let's just consider the implications of a desperate presidential administration trying to wield unconstitutional power over all sorts of guard rails in government. Consider that it has its sights on the Federal Reserve as well. I think that the real power brokers (probably centered in the global banking complex) of a planet increasingly gripped in evil will actually keep the Fed out of Trump's crosshairs. But for their own reasons will allow the Fed to play ball with Trump to a degree.
For many years would-be commodity bulls touted the "super-cycle" that was just around the corner. Well, you can shovel as much shit as you want against a strong tide, and you're going to end up wearing it. Until, that is, the tide goes out. The "Continuum" chart above is a picture of an outgoing tide.
In this new macro gold led, as it usually does. The gold miners followed, led the 2025 broad bull market, and to this day maintain an intact uptrend vs. their shiny and valuable product. Then silver kicked in and led gold—which gave the green light to the commodity complex as a whole.
Will the counter-trend disinflationary macro hurt the commodity complex in the interim? Well, if we get a full Goldilocks situation, it would be quite possible. But that is a notion of the old disinflationary macro. Today, it is hard to see how Scott Bessent is going to engineer that. The administration's powerful puppeteers maybe? That remains to be seen.
So far, the complex has shown little sign of slowing down as a whole. Sure, silver got whacked on schedule, and gold took a moderate hit. But up pops crude oil and the energy complex, copper and a host of other critical minerals at the heart of global trade and geopolitical strife within this inflationary macro.
As another side note, I had expected the precious metals to take a more extended correction (after the anticipated bounce), and so far that view is incorrect. Silver got hammered so badly that it just may have cleaned out its investor base to a degree that the precious metals could end the correction. Between all that potential upside bounce real estate in the silver price and some of the higher quality gold stocks ticking new highs, it's all on the table and (near-term) time will tell.
But this article is not about that sort of week-to-week management either. It is about the new macro, as first indicated in 2022, when the Continuum above broke trend. It is about bonds signaling bad things on the inflation front (pending the continued interim easing of such fears) and it is about avoiding herd-think that was a product of and era gone by.
In the markets, it can pay to be a card carrying herd member. But that is only as long as the trend you're herding to is still there. It is not there anymore, and the markets have already begun factoring that fact in. Anyone professing otherwise (and cherry picking data start points like 1980) is either inexperienced, naive or simply talking their book.
The new macro is not only intact, but continuing apace as we experience an interim disinflationary period. If things go a very Goldilocks sort of way in 2026 the paper world of stocks and bonds can continue to bull. Perhaps the SPX/Gold ratio above could even get an upside test of its breakdown.
But the big picture, my friends? The big picture is a whole new kettle of fish, and it's not disinflationary.