Financial Apocalypse: Which breaks first?

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The chart below shows the sectors of the US financial markets that our model has identified as more likely to break down: 

1. S&P500: the stock market

2. KRE: the index of US small/regional banks

3. HY OAS: the option adjusted spread for high yield/junk corporate bonds.

4. USD/JPY currency cross

The probability that none of the four will break down within 3 months is 92.9 % as of 31 Oct 2026 . However, the probabilty that none of the four will break down within 12 months  drops to 40%.

Now we have the mid-term election on 3 Nov, Scott Bessent's Treasury re-funding estimates on 4 Nov, possible good/bad news on US-Iran war after the mid-term elections.  All this can drastically reduce the probability of none of the four breaking down within 3 months. Come back on 7 November to see. 

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Real yields as meaured by TIPS is still positive but falling rapidly. See chart. What will be the impact on gold and silver? See table. 




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