2022 STOCK/BOND CORRELAION CRISIS

The year that sovereign debt becomes the issue...

To start, we must go back in time to provide some context.

2000, 2008, and prior financial crises

When the central banks stepped in to provide liquidity and “lender of last resort”, the world lost its free market. Once people/corporations realized they could take on immense risk, and be always saved, the issue would get more serious each time

Fast forward to 2022

Now, central bank balance sheets are so large from taking on private commercial bank toxic asset offloading that THEY are failing. The systematic risk is now leveled up to sovereign debt instead of corporate/commercial bank debt.

Therefore, fed funds rates have been hiked at record speed. Government bonds have plummeted…ie. higher risk of underlying means yields must rise to accommodate the higher risk.

How long will this go for?

Well, the answer would be until something breaks, or powell takes a pause.

So what do you do?

We need the …