Markets are getting slammed. Stocks, precious metals, crypto, everything's selling off. Everything's interconnected: Metals crash feeds stock fears, amplified by Warsh policy jitters and overbought conditions. Perceived AI overspending worries and now Warsh's Fed nomination has the dollar ripping and liquidity fears gripping traders. Copper's down 4%, silver's cratered 31% in a day, Nasdaq futures off 1%. It feels like the bull's broken.
But Warsh being nominated as the next Fed chair doesn’t change the government debt picture which remains at all-time highs.
This is classic pullback noise in a liquidity-fueled bull. Global central banks are printing like it's 2020. Fed balance sheet may shrink short-term, but record debt servicing ($1T+ US alone) forces QE acceleration. PBoC's injecting billions, while the Bank of England and ECB are likely to cut even if they stand pat on rates for now. M2's exploding- $188T global liquidity doesn't vanish overnight. Further, over the years, Warsh went from hawkish to dovish when it comes to rate cuts despite wanting to tighten the Fed's balance sheet. Trump would not have picked him if he believed Warsh wasn't sufficiently dovish on rates and liquidity despite Warsh seen as a hawkish inflation fighter.
This is not the 2022 bear when liquidity slowed, markets tanked. Now? Debt tsunami demands more fuel. Gold/silver unwind overbought runs (silver +200% YTD), but reflation trade rebounds on cuts. Semis test AI (watch earnings from AMD 2-3/GOOGL 2-4/AMZN 2-5 this week).
Stay nimble and opportunistic.