Synthetic Systems 2024.50

The 2024 mid year update of Synthetic Systems has been posted. After having struggled with the financial environment in the wake of the massive Covid-19-related monetary and fiscal paroxysm, it appears to have regained its footing.

As I’ve commented on a few occasions since, 2020 appears to have marked a secular turning point in the bond market and interest rates. A four decade bull market in bonds peaked, with yields hitting multi-century or even multi-millennial lows. Literally trillions of dollars worth of bonds around the world traded at such high prices yields went negative. The general financial environment tipped from disinflationary to reinflationary.

Synthetic Systems however was not designed to deal with very long term secular trends (nor very short term movements), but focuses on the cyclical aspects of markets that dominate time frames from about one quarter to four years. The financial watershed was of such magnitude that it overwhelmed those cyclical aspects, and it took several quarters for SS to process the changed environment. Recent quarterly charts indicate that it has now fully recalibrated.

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