Things are getting serious with Treasury securities and their interest rate levels as reflected by recent actions and rhetoric from the Secretary of the Treasury, to include the monetary authorities over at the Federal Reserve.

For many years we have been chronicling the fiscal and monetary policy backdrops of the United States. The overarching point has always been centered on the inevitable ramifications of these policies being too loose and easy for many, many years; think this 21^st century in particular.

Ramifications enter the socioeconomic scene in various ways, with the most obvious being ultimately higher interest rates, price inflation issues, debasement of the currency, and a decrease in national sovereignty as foreign entities hold large slices of the ever-larger amounts of the U.S. debt securities that are issued.

In an attempt to reduce upward pressure on interest rate escalation in the longer maturity spectrum of treasury notes and bonds, the Treasury Secretary in the month of August has moved to participate in Japanese yen intervention, solicited the Fed to expand the FIMA Repo Facility, which allows Japan access to dollars for more yen support, and announced a doubling of the buybacks of longer-dated treasury notes and bonds, as well as offering a “bigger toolkit” that can be used on the buybacks, which implies using the Treasury General Account (TGA) to fund larger buybacks.

Buybacks? With what money?

When most here X entity will be buying something back, it implies there is some readily available capital to do so. This is not the case with the U.S. fiscal situation as it is.

In some circles the aforementioned Treasury General Account (TGA) is being viewed as some sort of account that is holding nearly one trillion excess dollars. This view offers, or infers, that the TGA is some sort of side account that is sitting there for emergencies. Not true.

The TGA is the Treasury Department’s checking account.

Tax receipts and proceeds from treasury debt auctions move into the TGA, and payments the U.S. government owes move out of the TGA.

These are not easily overlooked payment obligations. They include well-recognized payment liabilities of the government such as social security payments, interest on the national debt, and payments to federal employees, to mention only a few.

TGA is the government’s checkbook; it is not a fund that is sitting there idly waiting for an emergency of some sort in order to be tapped. There is no near trillion-dollar fund sitting readily available to be tapped and executed to buy back longer-maturity debt as has been inferred by some outlets and officials.

Tax receipts do not come close to paying for all the U.S. government obligations; it is debt issuance that fills the void. With this, the buyback program ultimately boils down to buying older debt with what will prove to be newly created debt.

As shared above, the entire objective of this buyback approach, to include the yen intervention as well as the Fed’s FIMA repo facility to Japan, is to do everything possible to keep the longer-dated treasury notes and bonds from increasing in yield (think higher interest rates) even further than they already have via bond market participants balking at U.S. fiscal and monetary policies.

In other words, the buyback objective is an attempt to keep participants, any participants, to include foreign holders of treasuries from selling longer-dated treasury notes and bonds. If sold further, en masse, this can place further downside pressure on prices of those instruments, which in turn would increase their yields, i.e., interest rates.

What’s the Connection to Yen Intervention?

Japan’s currency has struggled notably within the currency markets over the previous several years. At times Japan attempts to do an intervention (these always amount to band aids) to prop up their currency as it trends southbound.

One source of funds to do so is to sell some of their U.S. treasuries.

As offered above, that is the bane of U.S. officials out of concern large sellers will place even more pressure on bond prices, and hence, interest rates. By the way, this is another well-worn band-aid approach, similar to the currency intervention approach when trying to support a struggling currency.

With this, the U.S. participated in yen intervention to help alleviate the need for Japan to liquidate treasuries in size.

Furthermore, the aforementioned Repo Facility from the Fed allows Japan to access U.S. dollars by pledging treasury securities that will simultaneously be held by the Fed rather than being sold by Japan out on the market.

How about some fiscal discipline rather than paper games?

Reduced to simplicity, all of the announced and executed measures taken to relieve further interest rate pressure, brought on by bond market participants continuing to be unimpressed with U.S. fiscal and monetary policies, boil down to paper games.

The true solution to this long-standing debt issue is to introduce disciplined fiscal and monetary policies. (An approach no political party or individual political officeholder is even mentioning.)

Through this market participants in the U.S. and around the world would be compelled to bid up treasury prices rather than sell treasuries or ignore them completely as an investment option based on investment analysis.

What participants are offering to D.C. officialdom is the investment analysis does not compute. They need a higher yield on treasuries to justify holding the paper.

Fiscal policies have been off the proverbial rails now for this 21^st century in particular. One trillion dollars of additional debt is now stacked up in a matter of a few months! Price inflation, the bane of bond holders, is now in its 66^th month of being above the Fed’s 2% price inflation target.

This massive structural problematic storyline will be fixed with paper games and band-aids?

Let’s go real time

To underline fiscal, and, through that, the monetary policy problems of this 21^st century that continue right up through the current day, we have excerpted from the U.S. Treasury fiscal data site directly below.

The evidence points to ongoing results to the current day that line up with results of recent decades, which is to say, deficits stacked on top of deficits.

What is the national deficit?

A deficit occurs when the federal government’s spending exceeds its revenues. The federal government has spent $1.80 trillion more than it has collected in fiscal year (FY) 2026, resulting in a national deficit.

$1,798,816,211,853

Compared to the national deficit of $1.63 trillion for the same period last year (Oct 2024 - Jul 2025), our national deficit has increased by $170 billion. 10% increase

National Deficit | U.S. Treasury Fiscal Data

To wrap up this edition, we thought it most telling to take in what general market participants have messaged in the month of August, seeing as August has been the period where the above policy approaches have been designed and executed.

On the long end of the treasury bond market, the area of the treasury market that the above policies are meant to influence, for its part, the 10-year note is down 10 basis points in yield, while the 30-year is down 6 basis points as of this writing. Both are rounding errors. Said differently, participants are wholly unimpressed.

Meanwhile, broadening out, as of this writing, we see gold has shot up 14% thus far in the month of August.

Other “debasement” trades have followed a similar upward trajectory. Debasement positions are trades executed that are beneficiaries of the downstream expectation of the currency losing more of its value in light of paper games offered as solutions.

The bottom line: expect further debasement of the currency as time unfolds, a price inflation backdrop that is less than favorable to the everyday citizen, and continued challenges in the treasury market courtesy of continued paper games rather than disciplined fiscal and monetary policies.

I wish you well….

-Ken from Mind Your Stops

On a personal note, I saw a mainstream business outlet offer, “People are chasing gold,” as they offered it, it was a sign that people are operating on the old “FOMO” approach, which stands for “Fear of Missing Out.”

In the most literal sense, are there people out there in the investment landscape that are “chasing gold” to use the phrase? Absolutely.

They see something trending upward when priced in U.S. dollars, and when it occurs long enough, they do begin the chase.

If the chase builds in numbers, it does devolve into a collective “fear of missing out.” This is a collective psychological state where the masses are convinced X cannot possibly go lower and is viewed as a guarantee to only go higher and higher as time unfolds.

When this process unfolds long enough, it devolves further into collective “bubble psychology” and the various stages of such unfold with predictability. As the stages of bubble psychology unfold, they are ignored by the growing masses that are immersed in it.

History has displayed the above process – initial chase leading to FOMO with FOMO then leading to full-on bubble psychology – time and again. Importantly, an initial chase does not assure follow-on FOMO, and FOMO does not assure full-on bubble psychology.

Current day, relative to gold, we are far from FOMO and even further from a collective bubble psychological state.

As citizens let’s hope we do not get to that collective state relative to the gold price when quoted in U.S. dollars. Why?

Local Currencies

Gold is gold; it is not a monetary unit of a specific country/government sponsor. An ounce of gold is ubiquitous – the ounce in your proverbial pocket is viewed the same whether you are in the U.S. or on the other side of the planet.

It is not a question of whether it has value, as it is recognized as an ounce of gold everywhere. The only question is what its value is when priced in X local currency depending on where you find yourself on planet Earth.

For example, you may find yourself in country A – a country that has displayed very bad long-running fiscal and monetary policies, and as a result, you note, when priced in country A’s local currency, it has never seen such a high price level.

Conversely, country B may be the direct opposite in that they have enacted very sound and disciplined fiscal and monetary policies within their country.

With this, you note your ounce of gold, when quoted in country B’s local currency, is near historic lows. Simply, country B’s local currency, as a result of said disciplined fiscal and monetary policies, has maintained its purchasing power strength and is “as good as gold,” as is often stated in such scenarios.

Obviously, the U.S. fits squarely into country A’s backdrop, and the price of gold reflects this fact when quoted in local currency, i.e., U.S. dollars.

Interestingly, in this 21^st century, nearly all countries around the globe align with country A rather than B’s disciplined approach.

Importantly, it is not about gold per se, when talking about gold, rather it is about the currency of the country you are pricing your gold in.

Underneath the currency, as is always the case, is the quality of the fiscal and monetary policies enacted, and through them, whether their local currency has maintained strength in its underlying value.

So, gold offers a reflection, if you will, of the quality of said policies. (We must add this is not a day-by-day or even month-by-month tally; rather, the big picture tells the story. The overall trend of gold is where the message is offered.)

The story rests squarely on the lack of quality and soundness of the underlying fiscal and monetary policies with the downstream debasement of the currency as concluded by market, general economic, and citizenry participants of the country in question.

If they are offering, “Give me gold; you can have this paper currency,” by bidding gold ever higher when priced in said currency, that is their way of offering the fiscal and monetary policies of the nation are notably lacking in quality, and hence they want little to do with the underlying paper currency of the nation in question.

The various participants know the currency will take the hit in its reduction in value and strength as money and certainly as a store of value.

The Bottom-Line Essence of Gold (A True Contender for the Most Misunderstood Asset)

Gold has been both money and a store of value for thousands of years the globe over. Its “store of value” aspect is our focus and is what is underneath gold’s performance when priced in U.S. dollars.

As a reference point, many can recollect back to the beginning of this 21^st century, circa year 2000. Back then gold was valued at a mere 250 U.S. when quoted in dollars. If you had an ounce of gold, you had $250 of value in your possession.

As of this writing, if you have an ounce of gold, you have $4416 of value in your pocket when quoting that ounce in dollars. The same one ounce of gold in your pocket became valued at 17x the level it was in the year 2000 when quoted in dollars.

As shared above, this says little about gold, but it says everything about the currency it is quoted in.

There is a simple old adage about gold that offers: “An ounce of gold 100 years ago would have bought you a very nice suit. Today, an ounce of gold will still buy you a very nice suit.” You could apply this adage on a timeline, and it holds true as an easy phrase to emphasize its store of value aspect.

Simply, it maintains its purchasing power and, in so doing, protects citizenry wealth the globe over, throughout time, from government officialdom’s fiscal and monetary policy shenanigans with the logical follow-on debasement of their currencies.

The Abridged Version

On a personal note, the above piece is an abridged version of an edition written just under two years ago with edited price quotes updated to the current day. I chose to share a reduced version of that original edition as an additional way of looking at our fiscal and monetary policy problems, which have been ongoing in this 21^st century.

Said differently, the intention for this edition aimed to address an aspect of those policies. Upon consideration, rather than going into you name it data set or chart(s) relative to those policies, the above would do so while also offering an opportunity to address gold and the seemingly endless confusion around that asset class.

With this, using the gold price and its big picture overall trend, such as is offered above, as of this updated writing, its U.S. dollar quote is 4416.00. Whereas in the above piece when written (again, just under two years ago), it was quoted at 2750.00 in U.S. dollars.

This represents a 61% increase in its dollar-quoted price level in just under two years.

Using the above piece as a descriptor for why participants exchange their dollars for gold, we can see, via the tremendous increase in gold’s U.S. dollar price, that since the origination of the above edition, said participants see no substantive change in the U.S. fiscal and monetary policy results.

Speaking to this, just this morning updated price inflation data reflected the CPI came in at a 3.4% year/year increase. As the headlines offer, this was in line with consensus expectations; hence, it is a victory.

Never mind it remains far north of the Fed’s often-referenced 2% price inflation target. That target that has now been unattainable for 65 consecutive months.

Said differently, the debasement of the currency continues as reflected via its ongoing reduced purchasing power.

I wish you well….

-Ken from Mind Your Stops

In a recent edition we looked at the potential for near-term recession through the lens of two segments within the bond market.

Per participants’ messaging through the bond market segments shared, there was little concern of a near-term recession being displayed by participants’ pricing behavior of those bonds.

For our part, we have great respect for collective market participants’ messaging throughout the entire landscape of the credit market. With this we are constantly watching that market through a plethora of views to distill any messaging we can identify.

If you are thinking that bonds are not of much interest to you, because, let’s say, you are a stock market-focused investor and hence feel no need to pay attention to bonds, we invite you to rethink your mindset.

The bond market as a whole is often viewed as the smartest market. Their messaging many times acts as an early indicator for many markets, which includes the stock market.

To invoke an overused metaphor, bond market participants are playing chess while many other markets are playing checkers. Ultimately, if the bond market begins speaking loud enough, if you will, all other markets at some point take notice.

Drilled down to the essence of this is that bond market participants are dictating the cost of capital throughout the economic system. The cost of capital, i.e., the price of money, impacts various markets as it plays a central role throughout the economic system.

Harking back to our edition a month ago, participants have added some additional pricing behavior that makes us question if they are beginning to chirp a bit about downstream economic concerns.

To be certain, in no way are we seeing blatant evidence that said participants are pounding the proverbial table of such a downstream concern. Just a chirp, if you will.

With this, we are continuing to look at the bond market, specifically the corporate bond market via the investment grade segment, which itself is chirping some minor concerns at this juncture.

To emphasize the point, we are not seeing a wealth of evidence of near-term recession concerns. Because we have great respect for bond market messaging, along with some change taking place in this segment’s behavior, we thought it worthy of sharing.

Corporate Bond Market Distress Index (CMDI) - FEDERAL RESERVE BANK of NEW YORK

The above is a corporate bond market distress index for the segment of investment grade corporate bonds. Investment grade is a rating which offers a low risk of default within the corporate bond market sphere.

The second district bank within the twelve-district Federal Reserve system is the Bank of New York. They publish the above data and index.

The chart dates back to the beginning of 2020 for some recent historical focus. A lot has unfolded in this short period of history which the above distress index speaks to.

On the left side our red up arrow highlights the tremendous distress in the Covid period. Then, in early 2022, our second red up arrow denotes the increase in distress as interest rates across the spectrum rose notably.

To the far right, our red arrow denotes the developing distress within the investment grade corporate bond segment as 2026 has unfolded.

Per the chart, this index had been down trending to dormant in the previous few years. That behavior ended as the calendar pages have turned here in 2026.

Again, to be certain, there is nothing screaming imminent concerns from this behavior. At the same time, this is a change in behavior from recent years via this distress index, which is why we are noting it.

Adding another piece to the puzzle

Click For a Larger View: https://schrts.co/ykMtGRhI

Let’s look at the actual pricing of investment grade corporate bonds for some additional perspective.

The above chart encompasses the previous twelve months of trading for this segment of corporate bonds.

Note the far right and the notable uptrend our red arrow highlights. This then morphed into some sideways trading on a price basis.

Our red circle along with the ensuing red downtrend arrow highlights a failed breakout.

Participants began to push these prices higher with the new high breakout and then changed course into a solid downturn. Failed new high breakouts always offer caution regardless of the market under review.

As the remainder of the chart offers, these bonds have traded in a volatile range since that initial downturn.

Our blue horizontal line is a line in the sand from the previous low point within this recent trading range. If collective bond market participants push the price level below that blue line, it will add to their chirping that not all is well within this segment.

Time will tell her story on this front.

For now, we continue to observe the bond market generally and the various segments of the corporate bond market specifically for any messaging that bond market participants are increasing concerns about economic issues.

As for stock market investors, we remind all that when the distress index kicks up (first chart) and then trends, the stock market chimes in with downside price action as well, given time.

Keep in mind that when distress kicks up and prices in bonds turn down, this then equals increased interest rates. That is, bonds down in price equal interest rates trending up.

When this occurs, it offers, in a broad sense, that the cost of capital is rising within the economic system, and that fact ultimately gets the stock market’s attention.

For now, we continue to observe the bond market closely for any additional signs of stress that may point to economic and stock market problems in the near-term.

I wish you well…

-Ken from Mind Your Stops

Fitting with the summer season and how many share pictures of a summer getaway, we thought we would take a similar approach toward reviewing the employment landscape for this edition.

With this, below we offer several pictures of the employment backdrop to share perspective of this strange employment market.

First is what we have often labeled as a tip of the spear for gauging the health of the employment landscape. To be fair, this is a bit of an exaggeration but used as such to underline its importance. If it is not the literal tip of the spear, it is one metric that earns its place close to it.

https://fred.stlouisfed.org/graph/?g=1X3Ny

The above depicts the weekly unemployment insurance claims dating back to the beginning of 2021.

Historically speaking, when these claims push up into the 350-400 thousand range, they offer a tremendous concern of recession. Dating back to late 2021, our red rectangle highlights how consistently low these initial claims have remained throughout the period.

These are released every Thursday morning, which gives a frequent update with each passing week. The most recent release reflected 215,000 claims, which continues to post very low levels.

The range depicted has posted a high point of 260,000 a few times, along with lows of 190,000 a few times as well. The current 215,000 print reflects the continued steadiness of this employment indicator. This is remarkable in its stability for the five-plus years depicted.

The well-recognized monthly employment results – i.e., the new jobs created metric

https://fred.stlouisfed.org/graph/?g=1X3Pl

The above dates back to the year 2000 and walks us up to 2020. We are noting the first two decades of this 21^st century to place our next chart into context.

The red line above represents 200,000 new jobs created each month. Each blue bar represents one month.

Note how consistent the new jobs created number has been relative to the 200,000 red line. It was more typical than not for the red line to be exceeded, touched, or come in marginally below the level of 200,000 new jobs.

The two periods denoting recession (vertical light blue shaded areas) are the exception, which is as expected when going into, through, and coming out of a recession. Outside of that, 200,000 was not an aberration or a notable achievement. Such a result was often viewed as pedestrian.

Now, 200,000 new jobs are met with celebration

https://fred.stlouisfed.org/graph/?g=1X3PK

Above, we pick back up on our 21^st century watch of the new jobs created metric by starting in January of 2022.

We chose this starting point to ignore the employment volatility of the Covid period – both down and then up again. By early 2022 the employment market began to settle in, if you will, but still had a few months of notable spikes, which reflected the ongoing reemployment, post-Covid.

As we moved on through 2022 and into very early 2024, the new jobs created metric continued to post results that were akin to our previous two-decade picture of our red line 200,000 level.

This has changed notably since that timeframe. In the year 2024, the new jobs created measure devolved into weakness relative to its history.

Our red rectangle begins in early 2024 and takes us out to the most recent update for June of 2026.

Underlining the change in behavior, the 200,000 red line (top of the rectangle) has become more of an achievement rather than the aforementioned historical pedestrian result it used to be viewed as. In addition, along the rectangle we see multiple months where negative employment results were posted.

Another angle for additional perspective

https://fred.stlouisfed.org/graph/?g=1X3Qc

The above gives a much longer time perspective of the new jobs created metric along with a different way of observing the results.

We date the picture back to 1980 up to the most recent release for June 2026. A few decades give excellent historical perspective.

Each bar represents the year-over-year percentage growth rate of the new jobs created for each month.

Looking at the multi-decade chart in its wholeness, we see that our 1% year-over-year growth level, depicted by our red horizontal line, has in no way been a tremendous achievement.

Rather, like the historical 200,000 new jobs created level, 1% growth has been viewed as pedestrian. The 1% level has been easily attainable outside of the historical recessions and recovery from them, depicted with the vertical light blue shaded areas.

To the far right, our small red arrow highlights that the previous two years have remained well under this 1% year-over-year growth level. This underlines the previous picture in how the 200,000 new jobs created marker has been an aberration, far from the historical pedestrian result we had grown accustomed to.

As an aside, note with each passing decade that the 1% red line level has become more of an achievement, if you will, than the decade prior.

This is most notable upon reaching the 21^st century via the year 2000 and how the results have acted relative to our red line. (The Covid time frame is an aberration for obvious reasons in light of an economic shutdown and then a restart.)

Yet again, the 21^st century, when placed under any type of economic review, offers, that which should not be, at least when compared to history. The century of runaway money printing and government indebtedness has left in its wake, thus far at least, results that are less than ideal.

Squaring it up

We have weekly initial unemployment insurance claims that continue to post amazingly low claim levels. Clearly, via these initial claim results, the U.S. employment landscape is not cliff-diving with tremendous increases in job losses.

Simultaneously, we have been experiencing a strange employment backdrop when looking at the new jobs created results. Using history as a general guide via the above charts, we could surmise that the U.S. economy is slowly rolling into a recession. This would be if the new jobs measure were all that we consulted.

This seems to be a stretch when viewing the rock-solid stability in the initial unemployment claims data, as well as other measures not shared in this edition.

Artificial intelligence certainly is playing a role in this storyline.

On this note, as one example of many, when reporting earnings for JP Morgan on Tuesday of this week, the CEO noted all the company’s major businesses posted record revenue for the quarter.

Importantly, he noted AI has helped the bank cut up to 40% of jobs in certain roles. He added that most of those people were offered positions elsewhere in the company.

Using this example, there are minimal job losses and, at the same time, a reduced need for new hires.

Ultimately, the disconnects in the above employment pictures cannot hold forever. Marginal employment gains are not a recipe for long-run economic strength and vitality. For now though, while strange, the overall employment backdrop is not offering an imminent recession.

We are continuing to watch closely with an insatiable curiosity as to where this is heading.

I wish you well…

-Ken from Mind Your Stops

It has been awhile since we offered an edition relative to any type of recession watch.

There are numerous angles that can be taken when discussing the potential for an incoming recession. One of our favorites is to study the bond market to see what collective participants are offering via their pricing and trading of various bond categories.

This approach itself invites a plethora of angles in light of the various bond categories. This, along with the use of relative strength charts within the space, adds additional layers for perspective.

It is important to keep in mind that market participant messaging offers insight into what may be coming down the pike, not what X data point(s) are offering in the now.

Market participants have no interest in waiting around for the economic landscape to be immersed in data that is pointing to an imminent recession. Said participants are fully focused on anticipation of such an issue, and, with this, a redeployment of capital to areas that are treated more favorably once a recession has arrived.

A general description of such areas is that they are defensive in nature. What is not of interest to said participants are areas that offer a wealth of risk when recession appears to be on the horizon. Risk assets are put aside in favor of defensive areas.

A risk asset is a bit subjective in its labeling. Some areas are marginally at risk, while others get rolled over when recession enters the scene.

Cutting to the chase of our observation for this edition, let’s take a look at a couple of areas within the bond market that historically get rolled over when recession enters. In other words, these are not marginally at risk but rather are lathered up in risk, in particular when recession concerns arise.

Click For a Larger View: https://schrts.co/QZFYgeGr

Above is a two-year chart of a high-yield corporate bond vehicle on a price basis. We have added a few annotations to draw attention to how skittish bond market participants can be with this higher-risk category when concerns of recession increase.

We begin with our first red circle and follow-on uptrend arrow approximately mid-chart.

This was in the spring of 2025. Recall how at that time the tariff debate was all the rage. With that debate came increasing concerns that recession would result.

The stock market, as a risk asset category, began to fall earlier and harder than the above high-yield corporate bonds did in the early weeks of that process.

For their part, bond market participants were not as sure that recession would be an end result. Ultimately, the above high-risk bond category chimed in with downside pricing but to a lesser extent than the stock market.

To the far right we have placed a black circle on some more recent downside with this bond category. This is the initial period of time when the Iran conflict began, which raised downstream economic concerns.

In follow-on weeks these bonds were bid upward again, offering little concern of economic issues via bond participant pricing of this high-risk category.

To the current day, we have placed a red rectangle to highlight the pricing behavior of this category in recent months. Note how stable the pricing behavior is in this time period.

Participants within this high-risk bond category are showing little concern of recession issues entering the near-term fray.

Below, let’s take a look at an even higher-risk bond market category to gain additional recession perspective from bond market participants.

Click For a Larger View: https://schrts.co/dKkYFBPj

The above is also a two-year chart with similar annotations included as in our first chart.

This category of high-risk corporate bonds is known as the “Triple Cs.”

We often say that the issuers of triple-C-rated debt are one mistake away from needing life support. We offer this to underline their risk status.

Adding broad economic recession to the business landscape places these bonds at significant additional risk. Hence, participants have no appetite for this bond category if they suspect economic issues are on the horizon.

Just as in our first chart we have annotated how these bonds react if economic concerns of any type enter the scene.

The above category responded to both the tariff debate of early 2025 and then the upstart of the Iran conflict in early 2026 by dropping in price significantly and quickly.

To the current day, just as in our first chart, note our red rectangle which depicts the stable pricing of this bond category by participants in recent months.

For this highest of risk bond categories to display such pricing stability of late, it offers collective bond market participants are showing little concern of a near-term recession.

Importantly, as depicted in both of the above charts, increased concerns of an incoming recession by participants do not assure a recession as a certainty. There are additional tools to help forecast the odds of recession certainty.

A starting point of doing a recession watch through the lens of the bond market is to observe the pricing behavior of the higher-risk bond categories, such as we have above.

The message to this point in time, via pricing from participants, is that economic recession is viewed as a low probability in the near term.

Fourth of July Already?

It is hard to believe the 4^th is essentially upon us. We wish you some enjoyable downtime with the midsummer break this national holiday brings with it. We will share another edition as early July unfolds.

I wish you well….

-Ken from Mind Your Stops

Over the years we have occasionally offered editions that have looked at the most important wage rate measure for the everyday household. It has been nearly two years since we have focused an edition on this important socioeconomic measure.

Underneath this measure, it elicits the old adage that it is not what you make that matters most, but what you keep.

That adage, historically speaking, usually spoke to taxes and how much the proverbial taxman took from household incomes.

If we widen the lane a bit relative to that adage, we can easily add what is known as the “hidden tax.” This is also known as the “thief in the night” tax, which, on a personal note, is my go-to phrase for this undeclared tax.

The latter seems more appropriate in light of the experience that it leaves a person or household once it is experienced. That is, wages/incomes are received, and then after paying the recurring bills, the individual is left asking, “Where did my money go?”

Welcome to the thievery of the hidden tax, which is more widely known as price inflation.

Under our aforementioned old adage, the central tenet of it is what you make. For most everyday households, this boils down to wage growth rates.

If nominal wages are growing, that is, wages before adjusting for price inflation, it can appear all are getting ahead. Enter the thief in the night tax, and a different story is often displayed.

The nominal wage growth rate is “stolen” via the hidden tax of price inflation.

Inflation-adjusted wages are the only ones that really matter. They assist in providing an answer when contemplating the, “Where did my money go?” question.

Below, let’s take a look for visual perspective.

Click for a Larger View: https://fred.stlouisfed.org/graph/?g=1WVtO

Over many editions shared through numerous years we have offered how this 21^st century stands out for what shouldn’t be. The above certainly adds to the list.

Note the plethora of red circles.

They are highlighting periods of time within this 21^st century whereby wage growth rates, when adjusted for price inflation, were negative, or, in some encircled cases, barely positive.

When looking at them in a cumulative sense, they show up consistently throughout the above timeline.

Unlike headline nominal wage growth, that is, unadjusted wage rates, these adjusted wage growth rates tell a story whereby a tremendous percentage of the working population, at times, has experienced the rate of price inflation exceeding the growth rate of their wages.

They experience how their wages cannot keep up with prices when they go from wage earner to consumer. Over long periods of time, this is not a winning strategy for society at large.

To the far right in our chart above, we placed an arrow denoting that, yet again, we have begun the process of negative wage growth rates.

To the left of our arrow, the large red circle encompasses two years of negative wage growth. After that we saw growth rates went positive in what we could call a mediocre-to-okay level. Positive levels that would not win the day, if you will, especially when negative growth rates were experienced for the prior two years.

Now, to the current day, we are back to negative levels.

If you have a kneejerk reaction that all of this is due to the Iran conflict and will be just fine on the near-term horizon, we offer that price inflation had never been conquered, only tamed, and began its ascent again nearly a year ago.

Along the path of this price inflation era, think 2021 and on, there has always been a reason offered in how the price inflation would be short lived.

Then, when it obviously wasn’t, reasons would surface as to why it had not been short-lived, with a quick follow-on that it would be extinguished soon. Rinse and repeat up to the current day.

There is always a reason, and of course, an underlying narrative to support the reason and how it will be handled soon. The problem? Price inflation continues on.

To be certain, the Iran conflict certainly added to the price inflation storyline, but it is not the only story relative to the re-escalation of price inflation over the near previous year.

And then there is the savings rate

The logical follow-on of today’s subject is an expected deterioration of the Personal Savings Rate. The proverbial, “rainy day fund.”

Click for a Larger View: https://fred.stlouisfed.org/graph/?g=1WGwG

Above is the Personal Savings Rate depicted over the previous decade. This allows for some broader perspective and yet some recent focus.

Our red arrow highlights the deterioration of the savings rate. We saw a peak level at the beginning of our arrow of 6.4%, which has declined to 2.6% as of the most recent update.

Our current 2.6% level is beginning to rival the ultimate low point of the last ten years, which stood at 2.2% via our small red circle.

While nominal wage growth rates have been consistently positive, the true tell is what wage rates look like when adjusted for price inflation. The adjusted wage growth rates impact many aspects of society and other data points when they go negative, or even marginally positive.

If you want to point to a handful or two of indicators that tell you the real underlying health of the socioeconomic system, adjusted wage growth rates should certainly be included.

Price inflation cannot be tolerated and must be tamed. It has been years now since we have seen the Fed’s 2% target level attained relative to price inflation measures.

While there are many price inflation measures, using the Consumer Price Index (CPI) as one measure, the last time we have seen that post a 2% level or less dates back to the beginning of 2021. That is more than 5 years ago!

Just like now, all along the way, the citizenry was assured that the 2% level would be attained again, often inferring such a level was just around the corner.

We are still searching for that proverbial magic corner. Similarly, now that CPI is registering 4.2% - more than twice the coveted target of 2% - we continue to have narratives offering this is but a blip.

The citizenry, relative to price inflation, needs more than narratives that offer all will be good again – down the timeline. Thus far, in recent years, the various narratives have not panned out to the point of actually ending this price inflation era.

As always, time will tell her story. For now, wage growth is turning negative, again, which, regardless of the reason or narrative, does not work for the everyday household.

I wish you well…

-Ken from Mind Your Stops

In our previous edition we focused on the 10-year benchmark treasury note and how bond market participants have pushed up its interest rate in recent months, as well as recent years, to the 4 ½ percent area. We are calling that too close for comfort relative to the psychologically important 5% level – a level that would be a new 20-year high if attained.

The 10-year treasury note is viewed as part of the long-end of the maturity spectrum for treasuries.

We looked at the long end and its stickiness to hold at high-interest-rate levels through the lens of price inflation, as well as the endless massive government deficit spending.

If we look at the shorter end of the treasury maturity spectrum, we see those same bond market participants are not waiting on the Fed to raise short-term interest rates in light of the increasing price inflation trend. Participants have been pushing up short-term rates in recent months.

The Fed is getting behind the price inflation trend again, which, if continues, will reassert their overall monetary policy approach of this 21^st century that is vastly different from the decades previous to the early 2000s.

Below we take a look at the long-term picture of the Fed’s short-term interest measure, known as the Fed Funds Rate, alongside price inflation via the Consumer Price Index.

Click For a Larger View: https://fred.stlouisfed.org/graph/?g=1WKnX

The above dates back to the mid-1950s for a broad perspective.

The blue line represents the Consumer Price Index (CPI), while the red line denotes the Fed’s short-term interest rate.

We have inserted a thin red vertical line within the chart to offer a visual compare-and-contrast perspective.

Note the relationship of the two lines in the decades preceding the early 2000s. Back then, the Fed’s short-term interest rate tool was kept consistently above the rate of price inflation. That is, the red line was consistently above the blue line.

To the right of our red vertical line, this relationship changed to the point whereby the Fed kept its short-term interest rate below the rate of price inflation. As a general observation, the red line has been kept consistently below the blue line as the 21^st century unfolded in light of this policy approach by the Fed.

To the far right of the chart, we see that in the last three years the Fed has reverted back to keeping their short-term interest rate above the level of price inflation.

We had asked in a distant past edition whether the Fed would revert back to this type of monetary relationship relative to price inflation. Time would tell the story as we offered it in the past.

As we stand today, via our small red circle to the far right, we see that price inflation is now beginning to rise above the Fed’s short-term interest rate.

Is the Fed reverting back to its now-established 21^st-century monetary policy?

When the Fed’s short-term interest rate is held below the rate of price inflation, it is considered an easy money approach. More formally, it is known as negative real rates, as the Fed’s interest rate is below the growth rate of price inflation.

As a general statement, this invites notable speculation in the broad economic system when this approach is used as a go-to. Welcome to the 21^st century storyline. Speculative fervor has run rampant throughout numerous markets.

As a side note supporting this view, the stock market, as one market example, is now hovering at the highest valuation level seen dating back to 1870 – not a typo. This is proven via the CAPE ratio, which is the cyclically adjusted p/e ratio; this is also known as the Shiller p/e ratio.

As a reference point, the previous high point was in late 1999.

You could say the AI bubble is introducing itself to the former Dot-Com bubble. The first one ended badly. How will this second one end?

You know how it will end. It will end like all bubbles end. They float around searching for a pin, and then upon discovery, they go bye-bye quickly. We digress.

As stated previously, bond market participants are not waiting on the Fed to raise short-term interest rates. Below, we share the trending higher short-term interest rates.

Click For a Larger View: https://schrts.co/EgmsTrJF

The above encompasses the previous year. For reference, the gradually descending black line represents the Fed’s short-term interest rate as noted with our blue arrow.

The red line denotes the 1-year treasury bill, while the blue line identifies the 2-year treasury note.

We have added a black vertical line as a reference point in comparing and contrasting the behavior of bond market participants toward these short-term treasury instruments.

Via the chart, bond market participants have been consistent in pushing up the interest rates of these short-term treasuries. For their part, they are not waiting on the Fed to increase rates.

If they continue as near-term weeks and months unfold, the Fed will respond by chiming in with the collective bond market participants.

Bond market participants, as a general statement across the treasury maturity spectrum, have not been seeing eye-to-eye with the Fed, if you will, in recent years. This is particularly true the longer you go out on the treasury maturity spectrum.

Bond market participants are ever less impressed with the price inflation backdrop and the deficit spending landscape, think monetary and fiscal policies out of D.C. officialdom in recent years.

This may prove to be problematic for many markets that are filled with speculative fervor, based on easy money and fiscal policies, if bond market participants continue with their ways of pushing rates upward.

Speaking to our first chart, the Fed may not be able to carry out the easy money policies of negative real interest rates that became a bit customary in this 21^st century without a bond market revolt. Such a revolt would involve higher interest rates throughout the treasury maturity spectrum.

This type of storyline would be quite a challenge for various markets that are bubbled up to epic valuation levels.

Without easy Fed and fiscal policies, those valuation levels certainly would struggle to hold at such high levels. Price inflation and bond market participants are central players in all markets at this juncture as we look forward.

The above overall storyline should prove to be quite interesting as 2026 unfolds to its conclusion.

I wish you well….

-Ken from Mind Your Stops

The bond market has been getting a bit nervous of late. This nervousness is displayed via price action that is picking up in volatility as well as some downside price action overall. With the inverse relationship of prices to interest rates, as prices have declined, interest rates have moved higher.

As a general statement, this has been true across the bond market spectrum.

For our part, within numerous editions over recent years, we have been focused on the long-standing megatrend that ended over 5 years ago in an important segment of the bond market. Like all megatrends, once they end, few realize they have actually ended until many years have passed by.

The megatrend in question is the multi-decade trend of ever-lower interest rates within the treasury market.

To date, most are unaware that said megatrend is over. Many still seemingly believe this is a short-term blip even though 5 years have passed by on this new trend. It takes time for collective psychology to adjust.

A few years ago, in our initial sharing of the end of this megatrend, most thought we had lost our minds. To be fair, it was not an opinion of ours but rather factual market-based data that was calling an end to the megatrend.

Our focus is the benchmark 10-year Treasury note because it impacts other interest rates in the economic system. As an example, mortgage rates are impacted according to the general direction of the 10-year treasury.

The 10-year, on a yield basis (think interest rate), had a rock-solid downtrend in place that began way back in 1982.

At that time, anyone suggesting that the megatrend of ever higher rates was ending, and, in-turn, would usher in a multi-decade trend of ever lower rates was certainly viewed as having questionable mental faculties.

Prior to 1982, the same 10-year had been on a multi-decade megatrend of ever higher interest rates. The masses had become so accustomed to that trend, the thought of a trend in the opposite direction leaned toward lunacy.

So there it is: megatrends die hard, both in their actual trends and even harder through the acceptance of such in collective psychology.

The 5-handle is too close for comfort

Click For Larger View: https://schrts.co/TiPquGmE

Above is our often-shared megatrend chart of the 10-year treasury which dates back to the mid-1970s.

Along the path of recent years, we have shared this chart within many editions. To the far right of the chart we have added a new blue line marker that identifies the 5% level for this treasury security.

We are not there currently, but as shared at the outset, the bond market in general has been getting a bit nervous. This includes the above 10-year treasury notes.

If the above eclipses the 5% level, it will be a new cycle high in this multi-year uptrend process. Furthermore, that level, if attained, will take us back to mid-2007 interest rate levels. With a bit of rounding, let’s call that a 20-year high.

Psychologically, that will be an important number, both in light of the 5-handle being taken out to the upside along with the fact that it is a two-decade old level.

The deficits offer no letup in sight

Click For Larger View: https://fred.stlouisfed.org/graph/?g=1Wtrn

Above is a 21^st century view of the federal government’s annual deficit results. Each bar represents one fiscal year. The government’s fiscal year ends September 30^th of each year.

Our red rectangles are highlighting periods of annual deficits that are close to or eclipse $1 trillion. Outside of our highlight boxes, there are a few years that are at or come close to $800 billion.

Place these bars together, and we see how the well-recognized federal debt is off the charts.

Our more current era, identified by the right rectangle, has been posting consistent $1.5 plus trillion dollar deficit levels. Currently, up through April of 2026, the federal deficit is running close to $1 trillion with five months to go until fiscal year 2026 comes to a close.

We could say that we are right on track for another year of trillion-dollar-plus deficit spending results. We will know with certainty in a few months.

The above offers no letup in continued increases in debt issuance brought to market by the government.

Couple this with our continued sharing on the price inflation backdrop, and you have an ongoing recipe for collective bond market participants demanding higher interest rates in order to be incentivized to purchase and hold government-issued debt instruments.

Add to the above, the recently updated quarter-end result of the government’s interest payments on the accumulated debt equals an annual run rate of $1.2 trillion dollars. That is $1.2 trillion paid on interest alone.

As a reference point, it was just back in mid-2019 that we had attained a then-high point for interest paid on the debt of $578 billion. At that time, $578 billion spent on servicing interest only was viewed as unfathomable. That was just before a short dip that was easily eclipsed with a relentless trend to current levels.

The 5% level for the important 10-year treasury seems inevitable unless somehow government spending becomes more in line with tax receipts.

On the price inflation front, as we have shared in recent editions, the upward trend that is getting noticed now actually began to form nearly a year ago. The point to this observation is renewed price inflation is not war-related only. It has been simmering on the burner, if you will.

If trillion-dollar deficits along with price inflation continue to be viewed as acceptable policy stances, we should expect the bond market in general to be cautious at best. In terms of the 10-year treasury, it will not take much more of said deficits and inflation to see the 5-handle challenged.

If the 5% level is attained and exceeded, it will be very interesting to observe the reaction of various markets to that notable change. For us, this is one market based metric that is high on our “watch closely” list. We will share more on this as developments unfold, be they up or down.

I wish you well….

-Ken from Mind Your Stops

Have you seen what the stock market has done lately?

On a personal note, the above is a question I hear consistently. My knee-jerk response is, “Which stock market?”

Over recent years (post-2022 in particular), we have shared more editions than I can remember on the observation of how the stock market is narrow in its participation.

What this means is of all the companies that comprise the broad stock market, a remarkably low number of them are providing the upside performance that is juicing the well-recognized stock market indices.

Most notable is the traditionally reported S&P 500 index. This often-referenced index is a weighted index, which simply means a few handfuls of companies have an outsized impact on its performance.

Conversely, within the S&P 500 realm, there is the equal-weighted index, which is as its name implies. All 500 companies are given an equal weight in terms of their stock price performance impacting the results of this index.

Hence, in a general sense, the reason for my knee-jerk quip of “Which stock market?”

Our Dow Theory observations

Approximately a month ago we shared an edition speaking to the general stock market backdrop via what is known as Dow Theory. That represented our second look at Dow Theory thus far in 2026.

We shared multiple Dow Theory editions because it had been quite a while since the two component indices of Dow Theory were actually functioning constructively. With this, we shared them as additional perspectives that collective market participants were attempting to actually broaden stock market performance.

Dow Theory offers that if both the Dow Jones Industrial Average and the Dow Jones Transportation Average are both trending upwards, whereby higher highs are attained, then it bodes well for both the stock market as a whole as well as the general economic landscape.

While neither of those indices is screaming a newfound Dow Theory issue current day, to be fair, they certainly are not thriving, in particular when viewed through a comparative lens of select areas that are thriving.

This is the problem with the general stock market landscape, in particular, just in the last few weeks. We have seen a renewed massive outperformance of some areas while the broader market meanders around nearly aimlessly.

With a broader timeline perspective in mind, we can say the behavior of the stock market in just the last few weeks has reemphasized the larger stock market landscape post-2022.

That is, post-2022 the stock market has been consistently narrow in its performance with occasional attempts to broaden in performance, only to then go narrow once again. Rinse and repeat.

Back to our two S&P 500 indices

Relative to the two different S&P 500 constructs, the weighted version is experiencing comparative outperformance to that of the equal-weighted index. This is in light of heavier-weighted companies within the index being in the sweet spot of what is working within the stock market performance backdrop. As shared above, this is very noticeable once again just in the last few weeks.

The Artificial Intelligence (AI) space and areas related to its build-out are the sweet spot of stock market performance. Various companies in line with this space are having an outsized performance impact with the traditionally reported weighted S&P 500 index.

Below let’s take a look at the two different S&P 500 indices.

Click For Larger View: https://schrts.co/rCEXRqsW

The above is depicting the performance returns for the previous year of the two different S&P 500 indices. The blue line is the traditionally reported, weighted version of the S&P 500, while the black line is the much less reported, equal-weighted version of the S&P 500.

Mid-chart we highlight the broadening attempt by collective market participants via our red lines. This attempt began in November of last year.

Note how the blue line went relatively dormant (think sideways price action) while the black line began to put in a nice consistent uptrend. Both then headed south in March with a bottoming out at the end of that month.

The real action began as April unfolded in that both were participating in upward performance trends.

Our red arrow highlights how, yet again, the market went narrow in performance as the blue line (the weighted S&P 500) went full rocket ride, leaving the black line (equal-weighted S&P 500) far behind in comparative performance.

While that was unfolding, Dow Theory, for its part, did not collapse but it has gone relatively dormant in conjunction with other areas of the stock market at large. This while the “AI trade” as it is known, has gone straight up all while the broad market has gone quite narrow, yet again.

The problem with narrowly participating market landscapes is they lead to downside problems, given time. A few handfuls of companies, historically speaking, cannot carry stock market performance alone eternally.

We continue to monitor stock market behavior relative to this narrowness issue. Our concern is if it cannot broaden out and display actual healthiness that is analogous to historical bull markets that it will end its run similar to that of which historical narrow market backdrops have ended in the past. Think much lower in price and trend.

For now, the broad stock market is holding its own.

It would go a long way under the banner of structural vibrancy if it could strengthen, similar to the trend the equal-weighted S&P 500 version displayed in our chart above, in the middle of the time depicted. The broader market was beginning to display a healthy trend but faded after just a few months.

We continue to focus on this storyline and will share accordingly through various angles as near-term weeks and months unfold.

I wish you well….

-Ken from Mind Your Stops

Since the launch of Operation Epic Fury back on February 28^th, we have shared fewer editions than what had been customary up to that point in time.

Through all the noise in the geopolitical landscape since late February, coupled with a high noise level in the socioeconomic backdrop domestically, we have chosen to share less in an attempt to step back a bit and share observations that cut through some of the noise rather than tossing more of it into the proverbial ether.

In an edition just over a month ago we attempted to cut through the noise that price inflation was no longer a thing. Seemingly, anytime price inflation as a topic saw the light of day, it was quickly brushed off as though it was a historical artifact.

In light of ongoing military operations following the launch of Epic Fury, price inflation was entertained again, suggesting it would be a near-term issue - but it would surely be short-lived.

As we shared a month ago and do so again in today’s edition, the problem with the past-tense view of the price inflation issue is that it is an incorrect view.

To be fair and accurate, its growth rate certainly reduced off notably high levels, but importantly, it has continued to print a growth rate above historical levels that would offer that it is a nonissue.

Below we share some additional perspective with updated data since our last edition on this topic.

Click For Larger View: https://fred.stlouisfed.org/graph/?g=1VU55

Above is a ten-year view of the PCE index, which stands for the Personal Consumption Expenditure Chain-type Price Index. We offer this because it is the Federal Reserve’s preferred measure for price inflation.

Importantly, relative to the above chart, we are sharing the PCE index that excludes food and energy. This is known as the core PCE index and is meant to aid in giving a view of what the price inflation trend looks like throughout the pricing structure, without those two more volatile components skewing the underlying price trends.

In light of the aforementioned military operations, anytime price inflation has arisen as a topic of late, the focus is always on energy and how that will be a problem. This always implies that if not for energy and the expectations of its downstream impact, the price inflation backdrop is fine. To the contrary.

In the above chart, we offer two red horizontal lines. The lower line represents the 2% level for this core PCE index. The Fed offers ad nauseam that they have a 2% target level. Per our lower red line, we can see that is a target level that we have not experienced in over 5 years! It gets worse.

The upper red line denotes the 3% growth rate level. Note how in the left portion of the timeline of the chart we had not exceeded the 2% lower red line, while the upper 3% red line was an unfathomable experience.

Turn your attention towards the right portion of the timeline of the chart and note the extreme differences. Per the chart, 3% is becoming more of a baseline experience rather than some unfathomable experience of years previous. Sadly, it gets even worse.

Note to the far right portion of the chart how the most recent update of this data reflects this Core PCE index is putting in a higher high while it breaks higher off of the 3% level. The most recent update covers up through the month of March, whereby it reflects a 3.2% growth rate year/year.

Importantly, keep in mind this is the core PCE index, which excludes food and energy. The reality above discredits the view that price inflation has been a nonissue in 2025 and up through here in early 2026.

An Invitation

To explicitly belabor the above point, I invite you to do a visual exercise with the above chart.

Place your gaze on the center of the chart and let your peripheral vision denote to you the extreme contrast, via the red lines as markers, of the two completely different price inflation experiences to the left and to the right of your center gaze.

It is literally the tale of two completely different price inflation storylines. And yet, supposedly, we do not have a price inflation issue.

As an aside, we will cross talk here in terms of topics; if you wonder why mortgage rates, as only one example, are not moving lower, revisit the above chart. Price inflation is the bane of bond market participants. Ultimately, it is bond market participants who set the cost of capital – think, interest rate – to include mortgage rates.

Onward to our subject Title

Over recent years we have occasionally shared a very long view of price inflation in the United States. We thought it timely to share the long view once again.

Below, we offer a 100-plus year view of price inflation courtesy of Ron Griess over at the Chart Store.

www.thechartstore.com

The above dates back to the early 1900’s for a long timeline perspective. The central observation point of the above price inflation history is how consistent double peaks are when a notable price inflation era initially breaks out.

Follow the red circles, from the initial breakout, to pullback, to another breakout that exceeds the initial breakout, along the historical timeline above. To the far right is our current price inflation era.

How will this era unfold?

As we stand currently, per the initial chart and data shared, we are not off to a good start if we are hoping to negate the above historical price inflation storylines of double peaks.

To be certain, time will tell her story on this. We will share accordingly along the path as the price inflation storyline unfolds.

I wish you well…

-Ken from Mind Your Stops

If we take a big step back and try to remember what was unfolding, as an important central theme within the stock market, prior to the launch of Epic Fury back on February 28^th, we would recall that a broadening stock market landscape had been unfolding since November of 2025.

In the months following the broadening shift back in November, we had shared various perspectives on that important development.

The significance of that structural stock market development was the fact that collective market participants were notably bidding up the broader stock market landscape. Coming out of the significant 2022 market downturn, a broadly performing stock market was sorely absent. This was a historical aberration for a new bull market launch.

Historically, when new bull markets begin after a notable downturn, they are robust and filled with upside performance opportunities across the broad landscape of the stock market.

Post-2022, this was not the case. Rather, the performance was concentrated in select areas of the stock market. Such a market storyline can be thought of as a narrowly performing market.

Historically speaking, narrowly performing market backdrops, given time, are ripe for problematic pricing behaviors, given relatively so few companies are experiencing upside bids in their share prices. Think of this as an 8 cylinder engine whereby only 5 cylinders are functioning properly. Given time, the overall engine will present systemic problems.

Bringing this up to somewhat recent weeks, back in mid-February we shared an edition that continued with our observation of the broadening stock market landscape. For that edition, we addressed what is known as Dow Theory.

At that time, it was quite interesting to be able to offer such a topic because a functioning Dow Theory landscape had also been sorely missing, post-2022.

Dow Theory offers that the stock market is offering a healthy general landscape when either the Dow Jones Industrial Average or the Dow Jones Transportation Average advances above a previous high point.

Importantly, once one of the two eclipses a previous high point, Dow Theory confirmation then arrives when the other joins in by advancing above a previous high point as well.

Keeping this simple, it is all about trend. A healthy market leaves in its wake a series of higher highs, i.e., a defined uptrend. This brass-tax Dow Theory definition was unable to present itself, which offered an additional signal of how narrow stock market performance had been, post-2022.

What was most noteworthy in our mid-February Dow Theory edition was the behavior of the Dow Jones Transportation Average.

We noted how this index had been missing in action, if you will, for four full years! That is a long time of no performance when placed within the context of a general bull market backdrop, albeit a narrow bull market backdrop.

With this edition’s general step-back view of the stock market’s central theme prior to February 28^th, let’s take a look at messaging from collective stock market participants through the lens of Dow Theory, with a particular focus on the Dow Jones Transportation Average, post-February 28^th.

Click For Larger View: https://schrts.co/YNaHQvjS

The above is a 5-year chart presented on a weekly basis for the Dow Jones Transportation Average. The 5-year view gives us some perspective on what has unfolded post-Covid. The weekly chart takes out a lot of daily trading noise, as each bar within the chart represents one full week.

The above is the same chart that we shared in our aforementioned mid-February edition. At that time we emphasized, via our two red horizontal lines, how this important index was unable to trend (think traded in a large range) for four years.

Our small blue arrow drew attention to a new high breakout that had finally occurred, and with that, a positive Dow Theory confirmation signal with both the Transportation and Industrial indices hitting higher highs.

The question then was, could this hold?

This is one of many questions we have been focused on monitoring for our market operations post February 28^th, as uncertainty became the operative phrase for the stock market. Could this Dow Transportation strength hold, in particular against the unknown energy pricing landscape through March and now April.

Per the upper right portion of the chart, we can see a short-lived dip below the red line whereby it was depicting a failing new trend attempt. Most interesting was the attempt at a trend failure, which then course-corrected quickly and aggressively, whereby it reasserted dominating trend strength since.

In fact, per the chart, we can clearly see the rapid trend reacceleration the transportation index has put in, which has easily eclipsed the previous high point from our mid-February edition. This is impressive pricing behavior for this important index within the Dow Theory signal.

Interestingly, the laggard is now the Dow Jones Industrial Average in that it has, to this point, been unable to attain its previous high point of 2026, let alone exceed it.

Regardless, the Dow Theory signal that we presented back in mid-February has hung in there quite well, all things considered, since the geopolitical upheaval began on February 28^th.

For its part, the Dow Industrial Average, as of this writing, is less than a thousand points away from its previous high point. Percentage wise, that is not far away.

The ongoing observation point, through the Dow Theory lens, is whether the Industrial Average will be able to attain its previous high point and then exceed it, whereby it would then join the Transportation Average with a new high breakout.

Through this, if it can occur, it would then continue to point to a Dow Theory confirmation signal that walks us back to a reassertion of a broadening stock market backdrop. Time will tell her story on this front.

For now, all things considered, Dow Theory has hung in there pretty well over the previous couple of months.

A Dow Theory confirmation signal, from here, would be a component of signaling participants are back on the broadening theme they put in place back in November.

I wish you well….

-Ken from Mind Your Stops

Over the last several years we have chronicled the backdrop price inflation storyline from nearly every conceivable perspective. No matter how we sliced it, price inflation was a systemic issue.

As a citizen, you already know this. What about in more recent time?

Narratives built and consistently iterated and reiterated, in particular from various policymakers in D.C., have offered nearly ad nauseam that price inflation was conquered and finished off nearly a year ago. The topic, as a topic, is a non-topic, if I understand the narratives correctly.

Regardless, price inflation is a topic, regardless of X narrative(s) offering that it is nothing but a historical topic, at best.

Importantly, very importantly, this is before the most recent war. What has seemingly seeped into the collective narratives, relative to price inflation, is that the war will bring higher prices, but those will be temporary.

This implies, again, that indeed price inflation had been taken care of, such as the narrative(s) have offered. It was a thing, then it was finished off, and it will be arising to some degree again, but that too will be finished off quickly, post-war.

The problem with this is the data has not been cooperating with the narratives. (This is always the problem with narratives eh, pesky reality gets in the way of a good storyline.) In particular, when we view the Federal Reserve’s long-standing favored measure of price inflation.

The Personal Consumption Expenditure Chain-type Price Index has been their go-to price index for many years. There are certainly many other price measures to reference, but this is their go-to.

We have delved into their go-to index in previous editions, along with a plethora of other price measures. For today’s edition we’ll look at the core index for Personal Consumption Expenditures (PCE).

The core index is the PCE index without food and energy costs included. This is called a core measure because it extracts out the more volatile components, such as food and energy.

This is meant to aid in giving a view of what the price inflation trend looks like throughout the pricing structure, without the volatile components skewing the underlying price trends.

It is here, as well as in various other price inflation measures, that we can see the data is not cooperating with X narratives relative to this topic.

Click for Larger View: https://fred.stlouisfed.org/graph/?g=1TwfT

For some broad historical perspective, the above chart starts in 1960 and walks us up to the current day.

To emphasize how stubborn price inflation has been throughout our current price inflation era, dating back to 2021, we inserted a red horizontal line beginning in the early 1990’s.

Think of this red line as a well-established ceiling whereby this price measure was clearly unable to penetrate, or even touch, until our current price inflation era, whereby it easily shot through it to the upside.

In addition, we have added a red circle to emphasize the more recent behavior. The encircled period dates back to January of 2024 to the current day. Yes, two-plus years of time whereby the growth in this core price index has refused to trend lower, while in recent months it has begun to trend upward again.

We emphasize growth because it is far too easy to see the declining rate of growth and interpret it as a decline in prices. Let’s not forget, the decline from peak levels merely reflects that the growth in prices is lower than what it had been at its peak growth rate.

As the above measure stands, this PCE core price index is registering a 3.1% increase in year-over-year prices. This is quite a distance away from the Fed’s well-stated 2% price inflation target. Hence, why we insinuated above that X narratives’ offering price inflation is a non-topic is pure fantasy.

Importantly, all the above data reflect pre-war price growth trends. When, and if, you hear that prices are rising again because of the war, you may want to mentally consult the above data to realize prices had already been rising prior to the war.

The bottom line, as stated above, price inflation trends have not disappeared. The Fed has cut their benchmark Fed Funds rate six times, beginning in September of 2024 up to the current day.

Along that path, for our part, we had questioned the price inflation evidence to support a rate-cutting campaign. History offers cutting rates during a price inflation era, but assuming the price inflation issue had been dealt with does not end well.

This certainly was not lost on collective bond market participants as they raised various treasury notes and bond interest rates while the Fed was cutting. This is their way of offering disagreement with the policy approach of rate cuts before price inflation was fully extinguished.

The coming months should offer quite an interesting storyline across the plethora of price inflation measures. Right now, with the Fed’s favored measures not cooperating at all relative to their 2% price inflation target, those who hope for additional Fed rate cuts may be disappointed.

Then again, if more rate cuts do surface while price measures are not cooperating, we all may be disappointed, as citizens, as we deal with unfavorable price trends downstream. Cutting rates to curtail a price inflation era has proven to be nonsensical, historically speaking, and is seemingly proving to be the case in our current era.

I wish you well….

-Ken from Mind Your Stops

If you are a consistent reader of our editions, perhaps you noticed the absence of our emails hitting your inbox of late. To be precise, February 26^th was our last edition. This turned out to be just two days prior to the launch of Operation Epic Fury.

From that launch date, visibility for collective market participants, across the board, went very murky. Said visibility also went murky for those who offer economic prognostications.

Regardless of the chosen focus, from markets to economic forecasting to even geopolitical analysis, downstream visibility quickly became quite blurred.

With this, for our part, offering a topic since our previous published edition seemed irrelevant in light of the above visibility issue. Even referencing collective market participant behaviors across various markets seemed irrelevant, realizing one new headline could change that perspective in a few minutes.

With this backdrop, we have found ourselves soliciting the help of one of our favorite questions: What do we know?

You see, when everything is murky, this question offers centering and some level of grounding. It is a baseline, rock-bottom type of question.

Through this question, it allows us to walk away from what seems like an impossible situation when working to project forward scenarios to an endpoint of drilling them down to market(s) positioning, to something at least a bit manageable.

The question customarily leads to being able to quantify more than we initially would think in light of the general confusion radiating from the large-scale issue at hand.

Below we share one answer that surfaced in our questioning, which we have actually addressed throughout numerous editions over recent years. We have addressed this topic through various angles to help in presentation: thinking different angles may aid in driving this reality into the conscious awareness of anyone reading.

Interestingly, the events of recent weeks further drive home our observation of recent years relative to this topic.

Click For Larger View: https://schrts.co/MaAsvDHz

The above dates back to the spring of 2024 up to the current day. The red line is the Federal Reserve’s fed funds rate. This rate is set by the Fed’s interest rate policy committee.

The black line is the benchmark 10-year treasury note shared on a yield basis – think interest rate level. This rate is set by collective bond market participants via their daily market operations.

In the left portion of the chart, September of 2024 to be precise, the Fed cut rates for the first time in this cycle. Our blue arrow denotes the day of the ½ point cut back then. Our blue circle below it denotes the level the 10-year treasury was at on that day.

You can visually see the clear and continued reduction in the Fed’s benchmark rate as time moved on via the red line. You can also visually note, to the far right of the chart, how the blue circle for the 10-year treasury (black line) currently resides at a higher level than what it was back in September of 2024.

The bottom line of this is while the Fed cut rates again and again, for their part, collective bond market participants have actually increased the interest rate of this key benchmark treasury note.

This continues to underline the fact that those who believe the Fed is the key to interest rates, across the interest rate spectrum, are mistaken. The most important aspect to the broad interest rate storyline remains with collective bond market participants.

If they are not willing to bid treasuries up in price, which results in lower yield (think interest rate), then broad interest rates will not be moving lower. Since the Fed began cutting rates back in September of 2024, bond market participants have not been willing to chime in with the Fed’s direction of rates.

Mortgage rates, for example, take their directional cue from benchmark treasury securities such as the 10-year treasury note. With this in mind, since the Fed began cutting rates back in September of 2024, the national average 15-year mortgage rate is also higher now than it was back in the fall of 2024.

If you hear someone offer how the Fed needs to cut rates further so we can get mortgage rates lower to help potential home buyers, we invite you to recall the above relationship chart as a guide to what really drives mortgage rates.

To impress bond market participants, if you will, a starting point would be for the issuer of treasury securities (think treasury department, i.e., government) to get serious about the fiscal policy that has devolved in recent years, to include up to the current day, of $1.5 to $2.5 trillion annual budget deficits as normal operations.

(Historically, those type of numbers were registered during extreme financial crisis, not as a fiscal norm.)

Until then, do not be surprised to see what we have been seeing in the above chart. That is, bond market participants that are less than enthusiastic about bidding treasuries higher on a notable price trend, which, in turn, would push the benchmark treasury interest rates notably lower.

At a time of geopolitical upheaval, “flight to safety” is an operative phrase that has unfolded in various markets. Interestingly, and underlining the above, bond market participants have not included treasuries as part of the flight to safety trade.

In fact, in recent weeks, said participants have actually pushed treasury rates higher by selling off treasuries rather than looking at them as a safe harbor for capital. You can see this if you reference the above chart again and look to the far right at the black line’s behavior in the month of March.

As we have offered in previous editions, if you really want to know what general interest rates are doing, watch the 10-year treasury note, which will inform you of collective bond market participants’ view of the general landscape. Through that observation, as an example, you will also be informed of the expected path of mortgage rates.

I wish you well…

-Ken from Mind Your Stops

Within a late summer edition of 2025 followed by an edition in the fall of 2025, we shared how collective stock market participants were displaying concerns for the employment market via the payroll processors.

The payroll processors are quite sensitive to the health of the general employment market in light of their core business function being at the epicenter of servicing employed personnel.

In light of market participants’ obsession with pricing markets today, in light of what they see downstream on the economic timeline, we found the behavior of the processors’ stock prices worth noting at those times.

In the front part of 2025, two long-standing payroll processors were clear stock market leaders.

Underlining their market-leading resilience, when the stock market went hard south in March and part of April, these processors stood out in that they barely went negative on their year-to-date performance at that time.

It was interesting to observe their resiliency in that collective market participants were clearly not concerned about the prospects for the downstream employment market, as they were extremely reluctant to trade their share prices lower. This, while large swaths of the stock market fell with ease.

Tariff implementations back then had collective participants concerned for general share prices, but not for the payroll processors.

It was as though they were signaling that the reindustrialization attempt with tariff implementations, or the onshoring attempt, as it is also referenced, would be a net positive for the general employment landscape, given time.

We have continued to observe how market participants are trading these two well-established payroll processors’ shares and continue to be amazed at the tremendous turn in the pricing of their shares over the previous nine months.

To go from tremendous resiliency in the face of notable downside stock market pricing to then being tremendous underperformers within a few months, all while the general stock market landscape improved notably, is a rapid change in tone in how their shares are being priced by market participants.

This is a multi-decade change in behavior

Over recent decades the payroll processors have lined up quite well with the general trends of the stock market. As the stock market would ebb and flow, the processors would trade accordingly.

This relationship was never lined up perfectly, but that is to be expected. It is the general trend of them that has stood out through recent decades. With this long-standing trading relationship solidified for such a long period of time, their divergence stands out notably.

Below we look at two charts that underline this divergence.

Click For Larger View: https://schrts.co/daAnceaG

Click For Larger View: https://schrts.co/PebwSsQY

Both of the above are monthly charts that date back 30 years to 1996. In both charts the black line represents the S&P 500, while the red line represents each payroll processor.

In the first chart, the red line is Automatic Data Processing. In the second chart the red line is Paychex. As a side note, we are using both as tools for this edition. We are not advising a buy or a sell on either of these companies.

Note the general trending correlation of both over the decades to that of the S&P 500. At times there is notable outperformance by the payroll processors, be it to the upside or the downside in that they would not go down as much as the S&P 500.

Our focal point for this edition is the far upper right of each chart.

We have noted the tremendous divergence in pricing behavior of these two long-standing payroll processors to that of the S&P 500 via our blue trend arrows.

The divergence has been stark in contrast as the S&P 500 has trended upwards while the processors have trended down since the summer of 2025. This continues in the current day.

Below, let’s take a look at this divergence in closer detail.

Click For Larger View: https://schrts.co/PnYPFZMD

The above is a returns chart that dates back to June of 2025 for the two payroll processors. The blue and red lines are the processors, while the black line represents the S&P 500.

The trading relationship of the processors to that of the stock market for the past 30 years gives the chart above its “wow” moment, if you will. To see this level of negative divergence is eye-opening.

Since June of 2025, think nine months, while the S&P 500 went on to solid double-digit growth, the processors are down 33% and 40% each.

Per the 30 years of trading history, we have not seen collective market participants display such a concern for the payroll processors (relative to that of the broad stock market), and, through them, a concern for the prospects of the employment market such as we are seeing in recent time.

Market participants are displaying a consistent disinterest in these companies while simultaneously choosing not to display a general concern for the stock market at large.

This is interesting in that if said participants had a notable concern for overall economic activity, the stock market at large would at least show some deterioration.

Does AI need payroll processing?

Most are well aware of the growing realization that Artificial Intelligence (AI) is here and that this technology, like most technological progress, will be disruptive. In this case the disruption can be, and seemingly is expected to be, very disruptive to a vast array of areas within the broad employment landscape.

By most accounts, this technology will be impacting nearly every job classification, given time. How much time? That is unanswerable with any degree of certainty.

AI represents an unknown and yet seemingly vast labor pool ready to compete for employment opportunities. Companies at large are certainly incentivized to employ AI, realizing that payrolls are a significant line item within their profit & loss accounting statements.

In a Financial Times interview recently, speaking to our “how much time” question above, Microsoft’s AI CEO said most white-collar jobs can be fully automated within the next year or two.

Time will tell her story on this, but for now the above divergence displayed by market participants toward payroll processors, relative to the behavior of the broader stock market, is offering their caution toward the employment landscape. The AI question is certainly playing a role in participants’ reluctance to bid these companies higher.

The obvious feedback loop question is, if the employment market turns upside-down whereby employment growth (for humans) is marginal, how does the economy hold up?

Through this question we cannot help but wonder if the payroll processor pricing behaviors (displayed above) are a very early sign of things to come for the stock market at large.

This is not a downstream expectation as much as it is a curious contemplation when thinking of the potential ability of AI technology to massively disrupt the employment landscape.

If this unfolds into decimating large swaths of employment opportunities, that level of disruption will show up in the broader stock market.

As the old adage goes, may you live in interesting times. We all are certainly living in interesting times eh.

I wish you well…

-Ken from Mind Your Stops

In today’s edition we will continue to look within the stock market landscape, continuing the general theme of recent editions.

We have been sharing the ongoing stock market leadership transition that kicked off in earnest back in November. Post-2022 in particular, technology as a sector dominated the stock market backdrop in performance.

The broader stock market, comparatively speaking, was largely ignored by collective market participants post-2022. While this began to change in November, it left with it an overriding question as to whether said change could last.

We have seen short periods along the path of recent years where a similar transition unfolded but would then disappear as quickly as it began. Prior attempts had no staying power. It appears this attempt has staying power, and this is notable.

At the same time, there continues to be a fair question emanating from collective market participant behavior as to whether this leadership transition will continue to unfold smoothly or whether it will bring with it overall stock market volatility that will be more than a minor bump.

First, let’s take an updated look at the described transition since November directly below.

Click For Larger View: https://schrts.co/xaadnVFQ

The three vehicles we are using in this edition to depict the transition to new leadership are the Dow Jones Technology Index (red line), the Dow Jones Industrial Index (black line), and the S&P 600 small company index (blue line.)

The Dow Jones Industrial Index (black line) should not be confused with the well-recognized Dow Jones Industrial Average. The Industrial Index above encompasses more industrially oriented companies.

We shared the above within an edition at the beginning of February. Underlining this leadership transition attempt, the above disparity has increased since then. This offers both staying power attributes of this leadership transition, while simultaneously offering a cautious concern in light of this increased disparity.

As we have offered within recent editions, when deeply established leadership within the stock market begins to be rotated out in favor of new leadership, it typically brings with it volatility at a minimum.

Worse, it is not unusual for a leadership transition process to bring with it notable stock market tremors to the point of impacting the stock market at large. Think of a backdrop whereby the stock market as a whole is negative, not by just a few percent, but rather, down some level of double digits.

Unseating deeply entrenched leadership typically does not offer a smooth ride.

Importantly, there is no certainty that this will be the case just because history offers it as a storyline of leadership transition. This is why we continue to focus on this transition process, while simultaneously keeping in our minds that this process can get messy.

In light of the above disparity actually increasing in recent weeks, it is keeping us focused on this transition question.

Directly below, let’s look at broader stock market indices to get a sense of how this is playing out using well-recognized stock market gauges.

Click For Larger View: https://schrts.co/ktMsbKaj

The above also dates back to the beginning of November up to the current day. The black line is the equal-weight S&P 500, while the blue line is the traditionally reported, weighted S&P 500 index.

Speaking to the leadership transition, it is clearly showing up in the performance differentials of these two S&P 500 indices.

The weighted version (blue line), which places outsized weight on select companies that are predominately technology oriented, is barely positive in performance since the beginning of November.

Meanwhile, the equal-weight S&P 500 index (black line) is trouncing the performance of its weighted cousin. This represents a major change in the behavior of the stock market structure, in particular post-2022.

In light of technology companies generally incurring poor stock market performance since November, they are dragging down the well-recognized weighted S&P 500, in particular when compared to leading areas as offered in our first chart, along with the equal-weight S&P 500 (black line) in the above chart.

Further deterioration in technology performance within the stock market, if it continues to occur such as is depicted in our first chart, will drag with it the weighted S&P 500, and, through this, can have a negative contagion impact throughout the stock market.

While this leadership transition is good for the stock market structure being that it represents a much broader market landscape and a healthier bull market environment, if technology gets too heavy, too fast, risks increase that said structure will also incur near-term drawdowns.

For our part, because we never lose sight of the fact that this stock market is epically highly valued when viewed through any valuation lens, through any historical timeframe observed, we are hyper-vigilant on the above leadership transition and the risks it can bring with it in light of prior leadership (technology) being bid down such as it is.

Highly valued markets can become unruly quickly when structural pegs, if you will, are repositioned.

Reduced to simplicity, below we will keep it as simple as possible using an index as a guidepost for the new leadership.

Click For Larger View: https://schrts.co/xwmEvRwm

In our previous edition we shared the above chart in light of its participation in the Dow Theory approach toward market analysis. The above is the Dow Jones Transportation Average.

This area of the stock market has been particularly ignored over the previous four-plus years. It has notably come to life as 2025 evolved with its November-to-current-day run leaving it as a shining star within the stock market structure. It has been a clear leader; stronger than even the leaders shared in our initial chart.

The red horizontal lines denote the trading range this average has been trading in over recent years.

The breakout above the red line was a very important behavioral statement by collective market participants. They bid this previously ignored area of the market up to and through new highs. Our blue arrow highlights the powerful breakout, and with it emphasizing a clear behavioral change.

Keeping it simple here, this leadership space should be able to hold its breakout level. The top red line should hold as a support, whereas previously it had been a ceiling that it was unable to penetrate.

If we see the market overall pullback, this Transportation Average and its behavior will offer important information relative to this overall leadership transition that we have been addressing here and in recent editions.

This leadership transition should prove to be very interesting as the near-term weeks and months unfold.

I wish you well…

-Ken from Mind Your Stops

The bulk of our 2026 editions have addressed the structural shift within the stock market that began in mid-November of 2025 and then picked up in earnest as we crossed into 2026.

By the close of last week we had another indicator chime in on the developing shift to a broadening theme within the stock market.

The indicator is the long-standing stock market tool known as the Dow Theory.

Dow Theory offers that the stock market is offering a healthy general landscape when either the Dow Jones Industrial Average or the Dow Jones Transportation Average advances above a previous high point.

Importantly, once one of the two eclipses a previous high point, Dow Theory confirmation then arrives when the other joins in by advancing above a previous high point as well.

Keeping this simple, it is all about trend. A healthy market leaves in its wake a series of higher highs, i.e., a defined uptrend.

A truly healthy market, let’s say, a robust and strong, no-doubt-about-it bulled-up type market, will leave in its wake a series of higher highs across numerous well-recognized stock market indices.

We have been addressing this general topic relative to the stock market nearly anytime we have shared an edition on the stock market, in particular since the post-2022 market downturn.

As we have shared many times, post-2022, the stock market has not been robust and strong when viewed through a broader stock market lens.

It was a narrow market environment whereby a few handfuls of companies played an outsized role in pushing various market indices higher, most notably, the weighted version of the S&P 500. This is where some companies are weighted heavier than others in the construction of the weighted S&P 500 index.

This can give misleading signals relative to the overall health of the stock market at large, especially when the larger weighted companies are thriving handsomely. This has been the case post-2022.

Moving back to our central theme of Dow Theory, it too has offered the lack of a truly strong and solid bull market since the 2022 lows.

Again, to emphasize, we are speaking structurally here for the whole of the stock market, not about whether there have been X areas of the stock market that have offered performance opportunities.

Let’s take a look at messaging from collective stock market participants through the lens of Dow Theory.

Click For Larger View: https://schrts.co/IQYvnAxX

The above is a 5-year chart presented on a weekly basis for the Dow Jones Industrial Average. The 5-year view gives us some perspective on what has unfolded post-Covid. The weekly chart takes out a lot of daily trading noise, as each bar within the chart represents one full week.

The above can be viewed and thought of as the anatomy of a trend process over the previous 5 years.

We have inserted a few lines to aid in a visual understanding of what has been transpiring in this period of time.

Our red horizontal line begins as the post-Covid high point was put in, which morphed into the notable downturn in the stock market, circa 2022.

For its part, the Dow Jones Industrial Average bottomed in late 2022 and then struggled through 2023. Our blue arrow highlights the launch point of the Dow actually putting in a higher high by early 2024, which proceeded as a trend.

Our black horizontal line highlights the end point of the Dow’s trend at that time, which walked us into the notable drop of early 2025. The 2024 trend was erased rapidly in early 2025.

This takes us to current messaging from market participants.

As early 2025 turned to mid-2025, the Dow Jones was back to working its uptrend. This was confirmed as a new uptrend when it surpassed the black horizontal line, whereby, rather than being a price ceiling as it had previously, it became a price floor.

From there the Dow Jones Industrial Average continued to be on-trend as it posted higher highs, as highlighted by our red uptrend arrow.

This takes us to the Transportation Average.

Click For Larger View: https://schrts.co/gTZcRzvW

The above is also a 5-year weekly chart to match the layout of the previous Industrials chart.

Overall, the Transportation Average is more challenged than the Industrial Average. Post-Covid, the Transportation Average was posting a series of higher highs. As we entered 2022, the Transportation Average also turned south.

Unlike the Industrial Average, the above Transportation Average had been unable to put together any trend since the post-Covid uptrend, as it remained in a large price range. Our red horizontal lines highlight the large range from late 2021 up to last week.

By the end of last week, a notable shift in its pricing behavior occurred with a long-awaited new high breakout.

The Transportation Average had struggled for over four years, of which it had been trendless until last week’s close, which reflects a solid new high. This is a notable change in behavior, as it has ended four-plus years of struggling price behavior.

Dow Theory

Reduced to simplicity, Dow Theory is about trend and trend confirmation from a sidekick index.

Simply, one of the two indices needs to put in a higher high, i.e., an uptrend. Once established, the other index confirms the trend by also putting in a higher high, whereby its own new high trend has begun.

When both the Industrials and the Transports are trending, we have Dow Theory confirmation of a healthy, ongoing bull market.

In various editions over recent years we have addressed Dow Theory and the lack of a positive Dow Theory signal.

By the end of last week, for the first time in quite a while, we saw collective stock market participants continue with the broadening stock market storyline via an additional signal of structural strength with the above Dow Theory confirmation.

Does this offer stock market nirvana from here? No.

For our part at least, no one signal offers clear sailing for as far as the eye can see.

What this does offer is a change in behavior via the Dow Theory, which we have not seen in over 4 years. That is a notable change.

This, along with other behavioral changes, such as we have noted in recent editions, offers the stock market, structurally speaking, continues to broaden out in its participation, and, through this, improve its structural health to a degree we have not seen post-2022.

This is important messaging from collective stock market participants!

I wish you well...

-Ken from Mind Your Stops

In our first edition for 2026, we addressed the stock market generally while specifically focusing on the broadening out of the market landscape.

Within that edition, as well as strewn throughout many editions in recent years, we addressed how the stock market, if it were an 8-cylinder engine, could be described as operating on 3 cylinders.

Simply, it was functioning (think bull market), but it could hardly be described as a rock-solid bull market with broad participation whereby large swaths of companies were charging higher on strong trends.

Rather, a few handfuls of companies, dominated by technology names, were roaring higher, which in turn made well-recognized indices, such as the weighted S&P 500, appear as though the stock market as a whole was strong and vibrant, if not on a roaring uptrend.

In the opening edition for 2026, we offered collective market participants were signaling a rotation attempt that was evolving to look like a stock market that was broadening out. Broader stock market landscapes, whereby large swaths of companies participate in healthy trends, are far more structurally healthy market environments.

The problem is, using history as a guide, when entrenched stock market leadership starts to take a backseat to other areas of the market (think rotation), the process often brings with it volatility for the market as a whole.

While it can be a positive development, that is, in this case, a broadening storyline, it can be a precarious process that brings downside volatility for the overall stock market. Succinctly stated, leadership, historically speaking, dies hard.

Back to our opening 2026 edition, within it we used three S&P indices to visually share what has been unfolding since early November.

Today, we will home in more specifically to the technology space along with two other areas that represent the broadening theme. As an aside, there are many ways to visually share the described rotation attempt, so below is certainly not the only way to do so.

Hence, why in our first edition of 2026, we took the approach we did at that time, and now in this edition, we are using a couple of different vehicles to address said rotation attempt.

Context is Important

Click Link For Larger View: https://schrts.co/GwyrzcRs

We have shared endlessly that post-2022, and its notable stock market downturn, that the fresh bull market acted as a historical aberration. Simply, as described above, it was lacking in broad participation. Think of an 8-cylinder engine operating on 3 cylinders.

The above performance chart depicts part of this storyline as it dates back to the beginning of 2023 up through the current day.

The three vehicles we are using to depict the narrow stock market landscape of recent years are the Dow Jones Technology Index (red line), the Dow Jones Industrial Index (blue line), and the S&P 600 small company index (black line.)

As an important aside, the aforementioned blue line, the Dow Jones Industrial Index, should not be confused with the well-recognized Dow Jones Industrial Average.

The Industrial Index above encompasses more industrially oriented companies.

Let the chart speak for itself. Note the tremendous outperformance of the technology index (red line) relative to the other two vehicles. It outpaced the Industrial Index by a factor of three while outpacing the small company index by a factor of five.

Clearly, as offered, stock market leadership post-2022 has been technology hands down!

Also as offered, collective market participants are offering a change attempt, or think, an attempt at rotating to a broader market environment.

If you take an additional peek at the above chart and look to the far right of each vehicle via the red vertical line we inserted, you can see the rotation attempt unfolding as the November downturn quickly evolved into rotation and an attempt at new leadership. Note the blue and black lines trended upwards, while the red line has struggled sideways-to-down.

Will this rotation attempt stick?

This is the central question and observation point that we shared in our first edition for 2026, which we continue to ask and monitor closely as we have moved into the second month of 2026.

Things are getting a little squirrelly in recent times as the technology space continues to lose a bit of its luster, and in so doing, speaking to our central concern, it is attempting to put a chink in the process of rotation to a broader market environment.

Let’s now home in on this storyline in recent months.

Click For Larger View: https://schrts.co/njCsjYmN

Above are the same three vehicles as in our first chart, with the color themes continued. Our chart is quite condensed on the timeline relative to our first multi-year chart. Above is November 2025 through the current day, as of this writing.

Note the tremendous change in behavior of recent months. The technology index, the red line, has been consistently struggling in performance, with it registering a negative 4.5% return since November 1^st.

For the venerable technology space of recent years, a three-month run of negative performance seems nearly impossible. In particular, if you read headlines up to the current day. As is often the case, headlines and reality can many times be miles apart.

On the broadening front, note the tremendous outperformance of the previously lackluster areas of the industrial space and the small company index shared in our first chart. Since November 1^st, they have been trouncing the technology space in behavior and performance.

While technology is posting losses since November 1^st, the industrial and small company spaces are posting 9% (rounded) positive performance. This is unheard of behavior relative to recent years.

Will it stick?

Yes, we continue to ask as this as this is our central question and observation point.

We emphasize, through redundancy, that rotation, historically speaking, typically brings with it downside volatility for the overall market.

Technology stocks are getting more and more concerning in their performance behavior, including in recent days. If this continues into a downside trend for the technology space, this will clearly show their leadership within the stock market performance landscape is turning over.

If so, what will that look like for the broadening market storyline of recent weeks and months?

For our part, we are watching this process closely and continue to chronicle the process here in these editions. In our view, relative to the stock market, it is the central observation point at this juncture on the timeline and speaks volumes to asset allocation within the stock market. We will continue to share accordingly.

I wish you well….

-Ken from Mind Your Stops

The cost of capital, i.e., the price of money, is the most important price of all within an economic system.

Where that price is currently (think interest rates), or in recent time, offers relatively little information and impact compared to a broader view of such price. The big trend - or what we have labeled “The Megatrend” in past editions - embeds key and important information.

If interest rates are generally double digits in an economic system, but the structural backdrop, along with the trend itself, offers those will be withering lower, given time, said high cost of money will not be as burdensome for the system at large in light of the lower trend.

Conversely, if an economic system has been immersed in low interest rates for a long while, and the masses fully expect the cheap money to continue, the economic system at large will have a slow but steady adjustment process to work through.

Interestingly, this slow but steady socioeconomic adjustment process is unfolding in our current era.

What the unexpected uptrend in interest rates (price of money) represents is a complete change from the multi-decade entrenched view that interest rates can only be low, and, in time, only move lower, as though it is a law.

Collectively, we are moving toward recognition that indeed a high-interest rate environment is occurring, and yet, collective belief holds on that it will not have staying power and hence, will change “soon.”

Our current era is evolving through the typical collective disbelief of significant trend change, in particular when the trend change is something as socioeconomically impactful as higher interest rates.

Ultimately, this will evolve into the masses psychologically adjusting to not only an acceptance of such, but an expectation that this is the way it is, and will continue to be, for a long while. A new entrenched view will emerge, given time.

The stages of trend recognition and acceptance, on a collective psychological basis, do not unfold quickly.

Importantly, the process of collective recognition on through to expectation is a grind, of which we collectively continue to grind through in this current era. We will reach the collective point of ultimate acceptance that a new megatrend of high interest rates did indeed begin – ah, 5 years ago.

This is Really Happening

Let’s move from general theory and observation of megatrends, and the inherent collective psychological adaptation process of such, and onto the reality we have been living that interest rates, i.e., the price of money, has ended their multi-decade megatrend of lower and lower levels.

We have all evolved to the expectation that interest rates can only, and will only, stay low being this has been the case, on a trend basis, for four-plus decades. This entrenched collective belief system dies hard, while reality itself is continually presenting it is a mistaken psychologically held view.

Click For Larger View: https://schrts.co/XZNwziMD

We have shared the above chart in various editions over recent years, and for my part, personally, I have been monitoring this chart for the previous fifteen, if not, twenty years.

The motive for me doing so always fell under the view that when this megatrend changed, and it would change, being that all trends ultimately change, it would change all that we had become socioeconomically accustomed to through the collective expectation of ever cheaper money, i.e., lower interest rates.

The above chart is the benchmark 10-Year Treasury note, on an interest rate basis, dating back to the late 1970’s.

The red down trend line clearly identifies the multi-decade trend of ever lower rates.

As visually depicted, this downtrend ended as rates easily moved up through the (red) downtrend line and remain at elevated levels in the current day.

Our short blue horizontal line was inserted when offering and following this storyline in an edition from nearly three years ago. The point of that blue line was to act as a marker that these rates, if they were to show any sign of containment, would hold below the blue line.

As depicted, they moved even higher, and rather than it acting as a ceiling, it has become a floor, which has held as a low point, not a high point, as these rates have elevated and held high from that time nearly three years previous.

As a side note, it will be easy to interpret this as an opinion shared from us and how we see the interest rate world, if you will. This is not the case.

We invite you to trust your eyes. We are merely sharing a message from collective bond market participants (the smartest market btw), which has been unfolding for over five years. The above megatrend change is not an accident. The smartest market did not suddenly become stupefied.

But the Fed will fix this

Part of the entrenched view of the multi-decade downtrend in interest rates is that the Fed is the ultimate determiner of interest rates. This is false. Bond market participants are the ultimate determiners of interest rates.

The Fed can choose to lower their short-term rate, known as the Fed Funds rate, but there is no law that states bond market participants must follow the path of the Fed’s directional change in their benchmark rate.

A case in point dates back to September 18^th of 2024 and on up through the current day. Back in September of 2024, the Fed began a new rate-cutting cycle.

In that cycle, from September through December of 2024, the Fed cut their Fed Funds rate by one full percent. After a pause in rate cuts for the bulk of 2025, they continued with further cuts in September through December of 2025.

All told, from back in September of 2024 on through here to early 2026, the Fed cut their Fed Funds rate by 1.75%, or 175 basis points.

For their part, collective bond market participants consistently sold bonds off, to include the above charted benchmark 10-Year Treasury notes. As bond participants sold these Treasuries, all while the Fed was cutting, prices moved lower, which in turn, increased the 10-Year Treasury Note rate.

(When bond prices move lower, their interest rate moves higher.)

Yes, the Fed reduced their benchmark rate by almost 2%, while bond market participants increased the 10-Year Treasury note rate.

With this, the Fed Funds rate was dropped from 5.5% down to 3.75% from September of 2024 through the most recent Fed cut in December of 2025.

On September 18^th, 2024 (the beginning of the Fed’s cutting campaign), the benchmark 10-Year Treasury note was yielding (think interest rate) 3.6%. As of this writing, the 10-Year Treasury is now at 4.25%.

Bond market participants have pushed this interest rate up by more than half of a percent (65 basis points to be precise) all while the Fed cut their benchmark rate by 1.75%.

Mortgage rates have a correlation in trend to benchmark Treasury securities. During the aforementioned Fed rate cutting cycle, the 15 Year Fixed National Average Mortgage Rate has also increased.

Back in late September of 2024, the above mortgage rate was quoted at 5.15%. Today, the fixed national average is 5.49%. Mortgage rates have risen by 3/8% or 34 basis points, to be precise. This, while the Fed cut by 1.75%, or 175 basis points.

Now, who controls interest rates?

Collective bond market participants control interest rates.

Media sources can discuss and focus all day long on whether the Fed will cut, raise, or pause, at any given time.

Our true focus should be placed squarely on the bond market and what they are signaling via their trend characteristics if we really want to know what direction interest rates are moving toward.

They continue to message that the high rates they put in place, via daily bond market trading, remain stubbornly in place. With this, they are offering little expected change is on the horizon via the lack of trend characteristics that would offer lower rates are imminent.

If you really want to have a sense of where general interest rates are heading, directionally speaking, watch the Treasury bond market for insight.

I wish you well….

-Ken from Mind Your Stops

In our previous edition we shared how collective stock market participants were improving the structural health of the market by broadening out its participation.

This process began after the quick but short-lived drop in the stock market back in mid-November. Since then, the broadening trade has been in place and increased its momentum in early 2026.

Part of this broadening storyline has been small size companies (a.k.a. small caps) as they have been putting in actual outperformance since this shift in November. To offer small companies are actually outperforming seems to lean toward telling falsehoods.

It has been a long while since small companies have been able to claim a spot atop the leaderboard within the stock market structure. So long in fact that trust in this shift has us questioning its validity and its stamina to maintain itself.

We remind ourselves, upon sharing such a view, that this type of sentiment sounds like perfect bottoming psychology. To be clear, it is not that small companies have been in a long downtrend; rather, they have been in a long period of marginal participation all while the narrow stock market went about trending higher and higher.

Let’s get perspective via small company trading behavior in recent years just below.

Click For Larger View: https://schrts.co/ZyKFesVS

The above is the S&P 600 small company index dating back to early 2019. Our blue arrow notes the expected behavior of the S&P 600 as the stock market quickly ascended off its Covid lows.

Historically speaking, small companies lead the way in performance, in particular when shooting off prior notable downturns such as is displayed above at the beginning of our blue arrow. From that low point, the S&P 600 small company index handily outperformed both the weighted and the equal-weight versions of the S&P 500 by the end of 2020.

While the S&P 600 increased by 63% from the highlighted low point to the end of 2020, the equal weight S&P 500 increased by 53%, while the weighted S&P 500 increased by 45%. These types of results point to traditional strong and robust bull market activity coming off of notable lows.

That is, fresh bull runs are historically strong in broad participation, a characteristic that has been sorely missing in the stock market landscape coming out of the 2022 lows.

In early 2021, the S&P 600 small company outperformance characteristic began to significantly change and has been in place since that time.

Our red horizontal line begins at the high-water point for the above index in early 2021. Note the lack of any meaningful trend for the follow-on years. There would be fits and starts, only to end up trendless.

To the far right of the chart, where our red line ends, is where our most recent trend attempt began. This is also where the S&P 600 small company index began to assert performance leadership.

Below we isolate 2026 and the outperformance of the S&P 600 small company index.

Click For Larger View: https://schrts.co/eJnWUDxn

The above is a baseline chart with the S&P 500 (weighted version) acting as the baseline while the S&P 600 index reflects its performance relative to the S&P 500 baseline.

The outperformance of the S&P 600 has been positive from the very beginning of 2026 and has built on its momentum as the month of January has pressed on.

As of this writing the small company index is outperforming by 610 basis points, or 6.10%. This certainly is leadership behavior and importantly, behavior that began coming out of the quick dip in November. With this, the S&P 600’s leading behavior has been unfolding for a couple of months.

In light of the small caps’ poor performance over the last several years, to see a couple of months’ run of outperformance is noteworthy.

Will it last?

As depicted in our first chart above, this is not the first time we’ve seen small company’s begin to perform to a level of suggesting something substantive was unfolding, to only then see the trend attempt fade away as fast as it started.

Here is our central cautionary observation/contemplation:

In light various well-known big tech companies struggling with their trends, which in some cases have turned into notable percentage reductions from their high water marks, can the stock market overall hold together in light of this tremendous leadership space (of recent years) struggling with their stock price performances since November.

This space has primarily been responsible for the weighted S&P 500’s outsized performance since 2022.

The narrow stock market performance since 2022 has been masked over, if you will, by the tremendous outperformance of the weighted S&P 500, which itself has been driven in large part by the aforementioned big tech companies who are now, generally speaking, struggling with their trends.

Similar to the S&P 600’s upside momentum build since November, market participants have been attempting to build downside momentum among the big tech leadership space since November.

Also similar to the S&P 600’s momentum build here in 2026, said big tech downside momentum build is broadening out to more tech names as we have traded through a decent chunk of this first month of 2026.

This developing storyline has us both intrigued and cautious on capital deployment.

While the weighted S&P 500 has been struggling in its performance since November, a topic we shared in more detail in our previous edition, as of this writing it is now negative for the early part of 2026. It was positive just a couple of sessions previous.

The big tech downside is trying to build in its momentum and while doing so it is taking the weighted S&P 500 with it. This is expected in light of the strong weightings to this space within the weighted version of the S&P 500.

Circling back to the central point of this edition, which is small company outperformance, to emphasize, we are focused on whether this space, along with the broader stock market, can hold itself together if we see prior leadership (big tech) move notably lower from here.

When notable prior leadership turns over, history offers downside concerns for the stock market at large are valid. Will that be the case this time? First, we need to see if big tech will build downside momentum from here or whether this is just a short bout of stock price adjustments.

If big tech does build downside from here, the central observation point will be whether the broader market can continue to perform such as it has since mid-November?

As stated, this is our central cautionary observation/contemplation which as us intrigued with potential opportunity, and yet, cautious in light of questionable behavior from long-standing leadership, i.e. big tech.

We will share as this storyline unfolds.

I wish you well….

-Ken from Mind Your Stops

Collective stock market participants are putting a different market landscape together in recent weeks relative to what we had grown accustomed to in recent years.

To be fair, this developing change can disappear quickly, which has also occurred in recent years.

We have dedicated many editions over the last few years to our observation of the structural weakness within the stock market. If the stock market were an eight- cylinder engine, we would describe it as operating on five cylinders, at best, in recent years.

The headline performance of the stock market has been dominated by relatively few companies when viewed across the entire landscape of offerings throughout the market.

This type of market backdrop is succinctly described as a structurally narrow market. Conversely, when the performance of the market is supported by many, if not most of the companies comprising the stock market, it is labeled as a structurally broad and sound market.

Narrow markets are viewed as suspicious and, if you will, untrustworthy by participants in light of the lack of broad strength throughout the market backdrop. When a bull market is trending in a narrow sense, it can portend problems, given time.

We have shared this curious storyline of the market’s structural health, or lack thereof, as the bull market reasserted itself after the notable downturn in 2022. To underline this overall storyline with a historical context, below we offer a chart that was often shared within editions since that time period.

Click For Larger View: https://schrts.co/PvRBmRBe

The above encompasses this 21^st century whereby it places the performance of the equal-weight and weighted S&P 500 indices against one another. When the line above is trending upward, this means the equal-weight S&P 500 index is outperforming the weighted S&P 500 index.

In the equal-weight version, the index performance is a result of how the 500 companies’ stock prices performed in total.

The weighted version, which is the version that is always reported on by media, places more weight on certain companies relative to other companies according to how the index is constructed. With this, a few handfuls of companies have an outsized impact on the performance of the weighted index.

Our red arrows within the chart point to the strong outperformance of the equal-weight version coming out of notable downturns (bear markets) in this 21^st century.

Our black arrow, post-2022’s notable downturn, highlights the historical aberration of this bull market, as the weighted version has handily and consistently outperformed the equal-weight version.

Since that timeframe the weighted version has doubled the performance of the equal-weight version in percentage return results. 78% compared to 35%. That is notable atypical behavior for fresh bull market time periods.

Historically, we are accustomed to broad and robust strength across the stock market landscape when coming out of a bear market downturn. Our black arrow, pointing to the long downtrend, highlights how structurally narrow the stock market has been in recent years.

In the lower, far right corner, we see an uptick developing in recent weeks. This may only be yet another attempt at the market broadening out only to be turned back again, such as we have seen numerous times in the path of the highlighted downtrend within the chart.

As we often say, no trend goes up or down in a straight line, which is again affirmed in the above downtrend.

Below, let’s isolate recent weeks through a completely different view with an additional component added to the mix.

Click For Larger View: https://schrts.co/JKMfWymt

The above dates back to the beginning of November in order to provide some recent perspective. The black line is the weighted S&P 500, while the blue line is the equal-weight S&P 500. Our new entrant to the mix is depicted by the red line, which is the S&P 600 small company index.

All three lines are reflecting their percentage performance process since the beginning of November.

Take note toward the left side of the chart in the mid-November timeframe. Our red down arrow highlights how all three incurred notable air pockets that ultimately led to a resumption of the trend as November proceeded into December. Our red up arrow highlights the resumption of the trend.

Most importantly, our red up arrow also points toward a behavioral shift.

Note how the S&P 500 weighted index (black line) began to struggle in performance, in particular when compared to the other two as we moved into December. The equal-weight S&P (blue line) began to easily separate itself from the weighted version, as did the small company S&P 600 (red line) index.

As late 2025 morphed into early 2026, the behavioral shift that showed its first signs of life in the latter part of November continued to build in strength. Behaviorally speaking, in recent weeks the broader market has begun to perk up, especially relative to the more narrow, weighted S&P 500.

We added the small company S&P 600 index to the mix above for emphasis of said behavior.

The small company indices have been quite poor in their performance relative to the weighted S&P 500 index in recent years. In this case the S&P 500 weighted index tripled the performance of the S&P 600 small company index from 2023 through year-end 2025. 78% compared to 26%.

As an additional note relative to the atypical behavior of this post-2022 bull market run, small companies customarily lead the charge higher coming out of a bear market experience. In this case, as shared, small company stock price performance has been abysmal relative to the weighted S&P 500 index.

For the small companies via the S&P 600 small company index to show leadership in performance underlines the above behavioral shift of late.

As offered above, this developing shift can disappear quickly, as we have seen attempts at broadening behavior several times in recent years that ultimately fizzled out. For the small company indices to also show leadership offers additional credence to this current shift.

It is crucial to know the general behavioral tone of the market landscape when deploying capital. In a general sense, it keeps deployed capital from swimming upstream, if you will.

Collective stock market participants have been pricing in a change in the structural landscape of the market in recent weeks, which began to catch our attention as we came out of the mid-November air pocket as depicted above.

Now the central question and observation point is to monitor if this shift can stick and have lasting trend tendencies. We will update and share accordingly as the near term unfolds.

I wish you well……

-Ken from Mind Your Stops