Good morning. Let’s get into it.
For months, the trade has felt automatic. Dollar down, gold up, small- and mid-cap up. Rinse and repeat.
Now, the dollar is catching a bid even when the headlines say it shouldn’t. The tariff sequence was the perfect stress test.
On Friday, Feb 20, the Supreme Court ruled Trump’s IEEPA-based global tariffs were unlawful, and the dollar initially sold off. But the move didn’t stick. It reversed and finished stronger anyway, even as the administration moved to replace the struck-down IEEPA tariff regime with a new temporary global levy under a different authority.
At the same time, the 10-year has gone bid.
Even in private credit, liquidity is getting tighter. Blue Owl (a large private-credit manager) recently limited withdrawals in one of its retail credit vehicles to manage redemptions.
And in public markets, you can see the same thing in HYG/LQD rolling over.
This isn’t the “Warsh Trade” (new Fed chair = easier policy) or increased dollar credibility. It’s the signature of a growth scare that shows up in bonds well before equities.
We can intelligently get ahead of this move and adjust risk in the event it picks up even more steam.
In the Pro Edition, I break this down in full:
How the bond market just made a move most investors are not watching.
Myth-busting the “Warsh Trade”
Why credit is now flashing yellow, and what this means for stocks
How the dollar just ran a real-time stress test and passed.
How the S&P can look fine while portfolios underperform.
New risk positioning: the exact curve and FX trade, levels, and when to exit.
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