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You’re probably hearing a lot about bond vigilantes as of late, and for good reason. The federal government is broke, and with the latest budget bill, there are no signs that spending or deficits are coming down anytime soon.

But there’s been some notable developments over the past week that leads me to believe the “bearish bonds” trade has become overcrowded.

Most of you know I’m not a contrarian for the sake of being a contrarian. In fact, I love trends, it’s where I make my “easiest money” in markets. But the big money, that comes from observing cycles.

Let’s discuss what could happen if bonds are carving out a low here..

The Fed is Going to Move - But When?

One of the reasons why the Fed has been irresponsibly late in restarting the rate cuts is because they have been concerned about tariffs leading to inflation.

Now, if you’ve tuned into my live sessions here at TheoTrade, you’ll know that I find that to be a rather silly assumption, but that’s not the point I’m trying to make here.

The point is - tariffs are in a limbo now with the latest court rulings, and if anything, the tariff rates will be nowhere near where previously thought. In effect, we just got a “tax cut” from the courts.

But it doesn’t stop there - we just had the lowest Core PCE inflation report since March 2021. It actually went negative month-over-month. In other words, inflation is a non-factor at the moment.

Yes, prices haven’t gone down to pre-Covid levels, and I wouldn’t wait around expecting that to happen either. But currently, they’re not accelerating, which gives Fed the green light. What are they waiting for?

Probably for long-term bond prices to start rallying, and based on my model, it’s already begun.

That’s right - I’m taking the other side of the bond vigilantes.

If you want to understand why, I’ll be doing a mini-masterclass/quarterly forecast over at the Trinity Trade on June 11. If you join me, you’ll understand a lot more afterwards.

Here’s the thing when it comes to lower rates too - it’s usually very bullish for the tech sector. Tech has already been dominating the market since the April 7 low, and if we get bond tailwinds coming into the sails… let me just say this - we’re very early - “taco tweets” or not.

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