The macro risks for equities are building but a recession risk remains a LOW probability

It is the tension between liquidity and recession risk that will determine WHERE equities go from here

🧵👇 The main divergence we are seeing taking place right now is Mag7 (blue) has been pulling the index HIGHER as the broad market breadth is falling

In simple terms, we are see dispersion where a small portion of stocks are accounting for the majority of gains in the index

Developing a macro thesis is THE most important skill set to have as we move into a world where geopolitical risks and AI developments could quite literally mean you don’t have a job in a month.

You either understand cause and effect in markets or you get run over by them.
🧵 Every thesis starts from first principles.

Forget what the market narrative says.

Ask: What are the fundamental drivers of this asset?

Growth, inflation, liquidity, and policy are the real levers.

Everything else is noise layered on top.

The Fed is going to keep creating inequality in the system until the middle class gets completely cooked

This means that managing macro flows and cycle risk is the only way to maneuver through the next decade 🧵👇 The Fed’s transmission mechanism lifts asset prices faster than wages. QE and low rates raise the price of duration assets first. Households with assets gain. Households living on labor incomes lag.

Even though we have come off a little, we have a MASSIVE amount of reserves in the system.

The dollar debasement narrative is now consensus. Everyone is afraid that cash is trash and they will miss the rally in equities, Bitcoin, or gold.

The problem is that it misunderstands how money actually works

That kind of thinking usually marks market tops 🧵👇 When I analyze the macro flows across every asset, I am always looking for where expectations have a significant divergence from what is likely to take place. The key thing I look for is when expectations are based on an uninformed presupposition.

The reason WHY tariffs have an impact on markets is that they influence the most significant source of liquidity YTD: CROSSBORDER FLOWS

When these flows shift, they will mark a top in the credit cycle

Here is a full breakdown + how it connects to equities and Bitcoin 🧵👇 Foreign direct investment is one of THE critical drivers of flows in US financial markets. The fact that the dollar is the reserve currency and global trade is transacted in the dollar creates a significant surplus of dollar liquidity

This is WHY we have seen equity valuations at all time highs right now

(Chart below is foreign direct investment into the US)

These are all the MUST read macro books

Remember, if you understand interest rates and FX, you understand macro

🧵

How Are Tariffs Impacting Positioning and The Macro Regime 🧵

Is this a one-time volatility spike or the beginning of something larger?

Mapping the macro regime and its connection to tariffs sets the stage for everything moving into the end of the week 👇 If you have been following me for any period of time you know that I have been bullish stocks and neutral bonds on a cyclical basis. This is being driven by the credit cycle, procyclical monetary+fiscal policy, and the entire wall of money from AI.

CAPITAL IS MOVING OUT THE RISK CURVE 🧵

Capital is steadily migrating out the risk curve because policy and liquidity conditions continue to incentivize it. With nominal rates still below nominal growth and abundant liquidity across both fiscal and monetary channels, investors are being pushed toward assets that offer incremental yield or growth exposure. The real cost of capital remains deeply negative when adjusted for inflation expectations, and that creates an environment where holding cash or short-duration paper guarantees underperformance in real terms. The incentive structure is clear: move into credit, equities, and alternative assets to preserve purchasing power and capture upside in a reflating economy.

Short end real rates continue to fall and reflect this: This is the mechanical essence of the “There Is No Alternative” (TINA) effect. When real returns in safe assets are structurally suppressed, capital seeks higher-yielding risk assets by necessity, not preference. The equilibrium becomes self-reinforcing. As equities rally and credit spreads tighten, portfolio managers experience both absolute and relative performance pressure to rotate further into risk. Passive inflows magnify the dynamic as benchmark weights shift toward outperforming sectors.

This is why low quality companies are rallying right now:

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The biggest risks to equities are building under the surface on a structural basis

The current liquidity flows are sowing the seeds for the future crash, which is why understanding positioning and HOW HIGH macro flows can push us is CRITICAL

Here is a full breakdown 🧵👇 The regime is clearly characterized by expanding growth, procyclical monetary policy AND fiscal policy.

What does this mean? It means we have every major line item and element in both the economy and market pushing capital out the risk curve which means equities MUCH HIGHER

Notice that credit spreads are at cycle lows while there are a lot more upgrades than downgrades in credit ratings

YOU CAN'T INFLATE DEBT AWAY 🧵

The lazy narrative: “The Fed will just print money and inflate the debt away.”

That is not how the system works.

At the core: the Fed’s liabilities are not legal tender. They are bank reserves. Start with the basics:

Money is an asset liability web. Every financial asset is someone else’s liability.

Your deposit = your bank’s liability.
A Treasury = your asset, the government’s liability.

The Fed is part of this system, its liabilities sit inside it, not above it.

HOW DOES BALANCE SHEET FRAGILITY CONNECT TO THE MELT UP 🧵

The economy is never static.

It is a constant rotation of balance sheet dynamics.
Companies expand balance sheets on the upside and shrink them on the downside.

This cycle of leverage and deleverage is the fundamental mechanism of survival in markets. On the upside, competition forces companies to borrow.

If one firm issues debt to fund expansion, rivals must follow or lose market share.

Debt becomes a weapon for growth.

Balance sheets expand together and credit fuels the boom. (We are in the melt up right now)

WHAT IS MONEY? 🧵

Money is not a thing.

It is a web of promises: assets on one side, liabilities on the other.

Your deposit is the bank’s liability. A bond is your asset and the government’s liability.

The entire monetary system is an accounting framework of IOUs. This is why there is no single definition of money.

Cash, deposits, repo, even money market funds all function as money in different contexts.

What matters is confidence in the chain of promises.

Macro Liquidity For Bitcoin, Memecoins, and Hyperliquid 🧵

Macro view, trade set ups, and WHY we are about to see the rally from here The existence of crypto sits at the convergence of macro liquidity, technology, and the cultural revolution taking place

ALL of these dynamics are directly linked and are feeding on each other. If you understand the structural realities and connect them with cyclical and positioning changes, it will frame EVERYTHING happening in crypto land.

This is a full breakdown and analysis of WHERE we are likely to go in the S&P500 + Playbook 🧵

The macro regime continues to push equities HIGHER in melt-up mode as the Fed cuts rates into positive growth and elevated inflation

The question is about the PATH and POSITIONING 👇 The entire playbook I use to trade the S&P500 is published in the educational primer section of Capital Flows. It is 100% free and breaks down everythinng you need to know capitalflowsresearch.com/p/research-syn…

Credit spreads are at cycle lows. Equities are in melt up mode. Capital keeps rotating out the risk curve.

Everyone is chasing risk. But the real risk isn’t recession, it’s inflation 🧵 At cycle lows in spreads, the market is effectively saying credit risk doesn’t matter. Balance sheets are strong enough, growth is “good enough.” This complacency is exactly what fuels the outward push into risk.

The macro regime is approaching an inflection point where the Fed is facing even more evidence that the US economy is growing significantly

Today's economic data falls directly in line with the credit cycle melt-up view I have been laying out

Important updates 🧵👇 As I laid out previously, we are seeing all agents and major sources of liquidity faced in the same direction which is pushing equity markets higher

When one or more of these change, it will indicate we are beginning to have risk to the downside.

https://x.com/Globalflows/status/1970146139350667474

THE CREDIT CYCLE IS BEING AMPLIFIED, NOT MANAGED

Both fiscal and monetary policy have turned procyclical, feeding the same direction of the cycle rather than stabilizing it

This reflexive loop between the economy and markets is why the risks ahead are so misunderstood🧵 The biggest misconception about the market is that it reflects the underlying economy. This has ZERO evidence.

The economy and financial markets are self-reinforcing.

- Asset prices drive spending/credit → policymakers react → that reaction reinforces asset prices.

- Reflexivity means market prices don’t just reflect fundamentals, they shape them.

The liquidity flowing into crypto has more to do with the fact that the US/China relationship than it does with the Fed or "money printing."

If you understand the drivers, the next bear market won't catch you off guard 🧵 Crypto, Bitcoin, Gold, and Silver are ALL release valves for macro liquidity. I laid this out in the thread here for the current performance and BTC educational primer

https://x.com/Globalflows/status/1969432780196233465

The periods of green in the charts below are when gold & silver outperform Bitcoin

This is one of the most important relationships to understand because Bitcoin is in the process of being financialized

If you understand HOW the market is evolving, the next move makes sense 🧵
In the Bitcoin playbook, I explained how Bitcoin is a release valve for macro liquidity:

Bitcoin has a stronger connection to the risk assets and risk curve which is why it is correlated with equities

gold and silver are different, which is WHY they are outperforming right nowcapitalflowsresearch.com/p/research-syn…

The current administration is addressing the actual imbalances that exist from the dollar's reserve currency status

@SteveMiran is now in a position of influence on the political side and the monetary side

This has implications for politics, markets, the Fed, and midterms🧵 The current account in the US has been in free fall for years now which represents the entire import/export relationship.

In simple terms, the US imports way more than it exports.