The Battle of the Three Economy’s…

To me we are witnessing a confrontation between the 1) the Broad Economy, 2) the Commodity/Inflation Economy, and the 3) AI Build Economy. After the bond vigilantes took over on August 3rd, our Climate Tech Model has had a difficult period as I have fundamentally believed that all the Trump/Bessent actions have pushed us closer to deflation than inflation.

Moving forward and looking at the picture of the three economies from the current technical Index cycle standpoint here is what the model is seeing.

First, the AI Economy Index peaked on June 3rd, turned down on July 21st and is currently trying to break the downtrend.

Second, the Commodity/inflation Economy Index peaked on April 2nd, declined and then had a big rebound into September 16. It remains in an uptrend, but the FED has taken away the excitement.

Third, the Broad Economy Index peaked on August 3rd, after being in an uptrend since April 27th. It appears currently on the verge of signaling a downtrend. If that occurs, it will seem to be something of huge surprise importance to the markets.

All this poses an interesting quandary for the Bond market. The vigilantes forced the model to abandon its long TLT Bond ETF signal on September 1 when the TLT closed at 81.87. Subsequently, the TLT hit a low of 80.51 after the Fed actions, but is now struggling back up and is currently at 81.66 at noon today.