I hope I am Wrong…

In a way I feel like the last 39 years have been training for the coming period. In 1987 I was trading in Chicago when the crash occurred. Fortunately, our early technical trading system got us out of the market prior to the event. So, I was a watcher on that day, ironically while attending a college homecoming celebration.

A number of things come to mind, in 1987 the markets had come to believe that they had a backstop, a thing called Portfolio Insurance, something I will not try to explain, look it up. In the current market we have had a couple of backstops, one is the AI Buildout and the other is the Trump Manipulation Card which had a md-term election clause that made it even more powerful. Sadly, for the markets, the Iranian War debacle changed things and yet the market seems to think it can survive on the AI Buildout.

In 1987 the markets basically had a two-month rotation period between August and October, before things unwound quickly. In 2026 we have seen the leading market sector top out in early June and now after a lot of rotation we are sitting here three months later just as the FED is probably being forced into a hike, probably needs a half point to get ahead of the market, but surely a quarter point. Warsh is in a bind as I see his strategy to be one of controlling liquidity rather than playing with short rates. His bind is that Trump and Bessent are increasing liquidity through growth of government debt and then trying to flatten the yield curve. Fund flows have only recently started to show a little outflow as market players seemed to prefer holding on hopefully.

There is huge risk in the markets face, right now.

In 1987 the market did after consolidating climb back, that could easily be the case now as AI is a long-term project, not just a wild short-term thing.