3d (edited) • General discussion
5/28 - Market Update: Multiple Red Flags - is it signal or noise?
BTC - $73.7k
ETH - $2k
The stock market just hit all times highs, basically acting like everything is going great in the world, but real life is telling me a very different story.
This is the disconnect that I can't stop thinking about this week.
Wall street is looking at all time highs, AI earnings booming, and strong numbers in multiple sectors yet, Main street is seeing inflation everywhere - groceries, gas, and insurance premiums.
This gap is THE red flag - but alone, 1 red flag doesn't sway me - so why am I concerned now?
Because for the last few months, my base case was pretty simple:
The Iran conflict -> Inflation -> Crypto ranges Up/Down (in the meantime) -> Trump makes deal -> Iran War ends -> Oil prices cool -> AI infrastructure needed -> No workforce to fill demand -> Bad Jobs numbers -> Weak earnings at end of summer -> Then Fed gets breathing room to have rate cuts in the end of Q3-Q4.
This was the clearer path. (sigh.....)
Now? I'm not so sure - Because Trump does not seem pressured by the market right now.
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Here's what I'm seeing.
To me, Trump seems emboldened as markets are at all time highs.
He's saying oil is doing "better than expected" - He's saying US oil industry is booming and just yesterday during the cabinet meeting, he said he wasn't worried about the midterms.
And he's making it pretty clear that if Iran does not take the deal on his terms, he is willing to escalate again. ------ This is the signal.
If we were actually really close to a deal we wouldn't be playing these charades. I don't think Iran actually wants to give up the Uranium stockpile. If Iran were desperate for a clean off-ramp, you would expect behavior that lowers tension. Instead, everything we are seeing points towards extending their only leverage. I don't think Trump is going to walk away without it. Before I thought we might be able to off ramp quickly via some sort of payment - now that's off the table too.
This changes the market setup. Now the bearish scenario is actually gaining a stronger probability.
If high stock prices are giving him political cover, then markets may be making the same mistake they always make near the top of confidence cycles. They're confusing prices rising with real-world stability like the train will not stop and "this time will be different". Sure, AI is in high demand, but earnings will not grow in a lopsided economy and the bubble will burst very fast as investors pull out gains at the end of the year to rebalance portfolios. Especially if the Iran War does not end quickly and oil shock not only continues, but actually grows. Inflation will stay elevated and the longer oil stays high, the longer the inflation will take to cool down because oil demand will only grow during that period.
Another thing is that crypto is already sniffing it out. The crypto markets tends to move ahead of time. Let me explain - crypto is not necessarily falling because the long-term thesis is broken. Crypto is losing steam because it is the first place liquidity pain shows up. BTC and ETH do not wait for the fed to actually cute rates, they tend to move early when the market believes easier liquidity is coming a.k.a - interest rate cuts. But the opposite is also true.
When the market starts realizing rate cuts may be farther away, crypto feels that first too. That is the chop we expected. But the problem is now that an extended conflicts gives the Fed no room to cut unless something much worse happens and that is also bad for crypto markets.
Bitcoin is also already at the price levels we had discussed, faster than expected I will say and that tells me that the momentum to the downside could show up with BTC crashing into the 63-66k range again. This of course would drag the entire crypto market down.
So my read is simple:
- Wall Street is pricing confidence.
- Main Street is feeling pressure.
- Crypto is sensing liquidity risk.
- And oil is the battlefield.
- The market does not need perfect inflation.
- It needs believable inflation.
- It needs to believe this oil shock is temporary.
- It needs to believe the Fed still has room.
- It needs to believe the war path is narrowing, not widening.
- But if Iran keeps pushing for leverage and Trump refuses to bend, then this is not a clean de-escalation story anymore.
- It is a waiting game with oil, inflation, rates, and risk assets all sitting on the same fault line.
- That does not mean panic. But it does mean the market is getting dangerously comfortable with the wrong potential ending.
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5/28 - Market Update: Multiple Red Flags - is it signal or noise?
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