I can’t emphasize enough the ramifications for what I believe is a historic reversal of speculative finance

Everything points to powerful inflationary dynamics and a Federal Reserve hopelessly “behind the curve.” The market is now pricing in a 2.86% Fed funds rate at the FOMC’s December 14th meeting. Moreover, the Fed is expected to soon commence its $95 billion monthly balance sheet reduction (“QT”).

This implies a major cycle inflection point for the bond market, now faced both with a secular upturn in inflation and diminished QE prospects. And a secular jump in Treasury yields would demand a long overdue downward valuation adjustment for stocks, corporate Credit and other financial assets.

At this point, the Fed would have to dramatically tighten financial conditions to reset inflation expectations. But such a move would collapse fragile Bubbles. Going forward, de-risking will require more selling of securities holdings, rather than simply buying cheap hedges.