Bank of America calling for ATH pic.twitter.com/02CKeH2VjO
— Tom (@TradingThomas3) May 20, 2025
Perhaps the real reason the Fed has been reluctant to cut interest rates is that FOMC members realize that doing so will result in long-term rates rising. Since higher long-term rates will amount to an unwarranted tightening, the best way the Fed can stay loose is to do nothing.
— Peter Schiff (@PeterSchiff) May 20, 2025
Current situation:
1. Stocks are rising like the trade war is over
2. Gold is rising like the trade war is escalating
3. Yields are rising like the US has avoided a recession
4. Oil prices are falling like the US is entering a recession
5. The US Dollar Index is falling like…
— The Kobeissi Letter (@KobeissiLetter) May 20, 2025
Housing has a 44% weighting in CPI. 👇🏼
Chart: Zillow Analytics via @DonMiami3 https://t.co/Ik1fD2hEYs pic.twitter.com/RYA9YNQ5WW
— Kalani o Māui (@MauiBoyMacro) May 20, 2025
The bank of Japan is the linchpin for the entire global bond market
If they stop easing, we’ll see what real free market looks like https://t.co/Y7g2tfL5K6
— Peruvian Bull (@peruvian_bull) May 20, 2025
It’s coming! pic.twitter.com/b97s2ls1AP
— The Great Martis (@great_martis) May 20, 2025
Someone just bought $1,250,000 worth of $TSLA 350 puts expiring in 2 weeks
Top?? pic.twitter.com/4YxEHMMfoL
— John Trades MBA (@JPATrades) May 20, 2025
The optimism surrounding an all-time high in the markets is colliding with a harsh reality. Economic data is deteriorating, bond yields are climbing, and central banks are signaling that rate cuts are off the table. The Federal Reserve remains hawkish, unable to ease policy as inflationary pressures persist. The ongoing tariff war is adding fuel to the fire, threatening to trigger a global debt crisis. Banks are tightening lending standards, the housing market is stagnating, and Japan’s central bank may soon be forced to raise rates again as global borrowing costs surge.
The Federal Reserve’s stance is clear. Officials have repeatedly warned that inflation remains a concern, making rate cuts unlikely in the near term. The latest economic reports show rising unemployment and slowing consumer spending, yet the Fed is holding firm. The central bank’s dual mandate balancing inflation and employment is being tested, with policymakers acknowledging that both risks are increasing. The tariff war is exacerbating the situation, driving up costs for businesses and consumers alike.
Bond yields are climbing across the board. The 30-year Treasury yield has surged past 4.9 percent, reflecting investor concerns about persistent inflation and fiscal instability. The rising cost of borrowing is putting pressure on corporations and households, making debt more expensive to service. The global debt bomb is ticking, with emerging markets particularly vulnerable to the tightening financial conditions.
Banks are pulling back on lending. Credit availability is shrinking as financial institutions brace for economic uncertainty. Mortgage rates remain elevated, freezing the housing market. Homebuyers are struggling to afford properties, and sellers are reluctant to lower prices, creating a standoff that has stalled transactions. The housing sector, once a pillar of economic strength, is now showing signs of distress.
Japan’s central bank is facing a difficult decision. The Bank of Japan may be forced to hike rates again, a move that could disrupt the carry trade and send shockwaves through global markets. Rising global rates are pressuring Japan’s monetary policy, and officials are weighing the risks of tightening financial conditions further.
The broader picture is one of mounting instability. The combination of hawkish central banks, rising yields, trade tensions, and tightening credit conditions is creating a volatile environment. Investors betting on an all-time high may need to reconsider their expectations as economic fundamentals continue to weaken.
Sources