Luke Gromen flagging a critical macro setup: if US real rates push above 2%, expect a chain reaction — dollar rallies hard, bond yields spike, equities sell off, and risk assets get crushed. The trigger? A chaotic unwind of the US Net International Investment Position.
Translation: Markets face two outcomes — either a serious collapse or the Fed/Treasury steps in with massive dollar liquidity. We've seen this playbook before. Real rates matter. Watch the 10-year TIPS breakeven and nominal yields closely. If real rates break through 2%, volatility spikes and defensive positioning becomes critical.
This isn't theoretical — it's about capital flows, dollar funding stress, and what breaks first. Portfolio managers should be stress-testing duration exposure and equity beta here.
Translation: Markets face two outcomes — either a serious collapse or the Fed/Treasury steps in with massive dollar liquidity. We've seen this playbook before. Real rates matter. Watch the 10-year TIPS breakeven and nominal yields closely. If real rates break through 2%, volatility spikes and defensive positioning becomes critical.
This isn't theoretical — it's about capital flows, dollar funding stress, and what breaks first. Portfolio managers should be stress-testing duration exposure and equity beta here.