Howard Marks just dropped a new memo on fiscal-driven inflation. Worth reading if you're trying to figure out where macro is headed.
We're in a regime where deficits matter again — not because bond vigilantes suddenly woke up, but because the structure changed. Fiscal dominance is real. Central banks can talk tough, but when governments are running 6-7% deficits during expansion, the math gets ugly fast.
This isn't 2010 anymore. Back then, deflationary forces were strong enough to absorb fiscal sloppiness. Now? Labor markets are tight, supply chains are still fragile, and politicians have zero appetite for austerity.
The playbook: watch how bond markets react to fiscal announcements. If long-end yields start moving independent of Fed policy, that's your signal. Inflation expectations getting unanchored would be the next shoe.
Positioning matters here. Real assets, inflation-linked instruments, and anything with pricing power in a sticky-inflation world. Avoid long-duration fixed income unless you're trading a hard landing scenario.
Marks has been around long enough to know when the game changes. This memo is him saying the game changed.
We're in a regime where deficits matter again — not because bond vigilantes suddenly woke up, but because the structure changed. Fiscal dominance is real. Central banks can talk tough, but when governments are running 6-7% deficits during expansion, the math gets ugly fast.
This isn't 2010 anymore. Back then, deflationary forces were strong enough to absorb fiscal sloppiness. Now? Labor markets are tight, supply chains are still fragile, and politicians have zero appetite for austerity.
The playbook: watch how bond markets react to fiscal announcements. If long-end yields start moving independent of Fed policy, that's your signal. Inflation expectations getting unanchored would be the next shoe.
Positioning matters here. Real assets, inflation-linked instruments, and anything with pricing power in a sticky-inflation world. Avoid long-duration fixed income unless you're trading a hard landing scenario.
Marks has been around long enough to know when the game changes. This memo is him saying the game changed.