The Institutional Risk Analyst

Banks face a market in 2H 2026 where inflation is going to rise and prices for on-the run securities will likely fall. But the wall of money that has been manipulating individual technology stocks with impunity for months is going to go somewhere. In a world where the US Treasury is actively manipulating ST interest rates and arguably selling volatility, where do you hide?

And in the meantime, we view the end of QE as a net negative for global stocks as well as crypto. Everything is correlated in a crowd.

Last week Federal Reserve Board Chairman Jerome Powell confirmed that the Federal Open Market Committee intends to keep raising short-term interest rates based upon the strength of the US economy. Powell gave no indication that he is concerned about the rapidly approaching inversion of the Treasury yield curve or what this portends for banks and leveraged investors of all stripes, including the housing finance sector.

At the end of Q1 2018, almost 84% of all income earned by banks on leverage went to bank shareholders as a result of the Fed's policy of "Quantitative Easing," while the remainder went to depositors and bond investors. Thirty years ago, that situation was reversed.