Welcome to our weekly flagship editorial. We will try to be as a concrete and actionable as possible today amidst one of the trickier environments lately. It is all known stuff since this is an environment we have seen before when yield curves have inverted. Our base-case is that the crisis will turn much worse in coming weeks before central banks finally admit to the issue being of monetary nature ultimately.

Banks have a hard time dealing with an extraordinarily inverted yield curve due to 1) the risk of a deposit flight and 2) mark-to-market losses on bond portfolios. We can continue to explain these cases away as stand-alone cases, but the underlying reasons are found in monetary policy, and this is about as strong a hint that you get that the hiking cycle is over.

The below chart is a good example of how loud the bond market screams now. Either the Fed emergency cuts within 1-2 months or else this turns into an outright crisis.

This is of relevance to your portfolio composition across ALL assets and we have flipped quite a few views/positions over the past week as a consequence of what is unfolding! You better care about it now, before the central banks understand the issue.

We will elaborate on our crisis-portfolio below. Try us out with a FREE 14 day trial! 

Chart 1. Nothing to see here