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Headwinds And Tailwinds: Minding The Market Weather

Zero Rss
3 weeks 6 days ago
Headwinds And Tailwinds: Minding The Market Weather

Authored by Michael Lebowitz via RealInvestmentAdvice.com,

A sailor who fixates on the barometer will rarely leave port. A sailor who never checks it will eventually get caught in a storm. It’s easy for most investors to fall into one of those two modes, either warning that headwinds are approaching and taking cover, or waving off every warning because AI spending is carrying the market higher.

This article walks through several market headwinds that warrant attention, as well as a tailwind that may be large enough to keep the boat moving forward. Appreciating the headwinds and tailwinds in more detail will help you better monitor the market barometer, allowing you to assess and adjust risk levels with more awareness going forward.

Storm Forecasting

Market forecasting has more in common with hurricane forecasting than most investors appreciate. The goal when managing an investment portfolio is not to predict a single outcome but to understand the environment well enough to establish a range of possible outcomes.

When a hurricane is brewing, meteorologists don’t draw a single storm track forecast on the map; they draw a “cone of uncertainty” that contains dozens of possible paths. Over time, as more information is gathered, the cone tightens.

Some storms cause immense damage, while others prove much weaker than expected. Other once-threatening storms never reach land and peter away in the ocean. Which path materializes depends on many variables layered on top of each other.  Like markets, it’s a dynamic process that is impossible to predict with certainty.

Investors face the same task as meteorologists. We must gauge the many forces acting on markets simultaneously and consider a slew of others that may or may not pressure markets in the future. Doing so efficiently provides us with a range of outcomes rather than relying on a single forecast.

With many headwinds arising, the job for investors right now is to closely track the environment and be ready to trim their sails if needed.

The Headwinds Worth Watching Global Liquidity

Liquidity is the lifeline of markets. To wit, Stanley Druckenmiller once stated: 

“It’s liquidity that moves markets”

With the recent surge in the use of derivatives, options, margin debt, and other forms of leverage, changes in liquidity conditions are even more important than ever in shaping market expectations.  

Michael Howell’s Global Liquidity Index (GLI) uses factors such as central bank balance sheets, cross-border bank lending, shadow banking, repo markets, and collateral availability to assess how liquidity is likely to change. In a recent Commentary, in which we elaborate on his work and his current view, we stated:

The cycle is now pointing down into 2027. Howell projects $40 trillion in global debt rollovers by 2027, a $4 trillion increase from the previous year.  That borrowing demand comes as liquidity contracts, creating a mismatch between refinancing demand and tightening financial conditions.

The graph below charts Howell’s GLI alongside a 65-month sine wave that has been a good predictor of liquidity peaks and troughs. Howell’s index and the sine wave show the liquidity cycle peaked in mid-2025 and has been declining since, with the next trough not expected until 2027. Historically, the declining phase of this cycle has favored cash, long-duration government bonds, and gold over risk assets, precisely because a shrinking pool of global liquidity makes markets more dependent on cash flow and less prone to speculative excess.

Treasury Issuance

In a similar vein, the federal deficit continues to demand liquidity to fund the rapidly growing issuance of Treasury debt. That supply of debt has to be absorbed by someone. Heavier net debt issuance competes with demand for all other investments. On the demand side, with no QE and domestic banks constrained by regulation, there is less ability to absorb the new supply than in years past.  

Bear in mind, however, that if there is a stimulus package or even increased government spending to boost support for Republicans in the midterm elections, this headwind can also be a tailwind.

Restrictive Fed Policy

Even with the last cycle of rate cuts, real policy rates, as shown below, remain above levels most economists would consider neutral. Such a restrictive policy works with a lag, and the economy has so far absorbed it well. That does not mean the lagged effects are gone.

Furthermore, the Fed’s hawkish tone and the potential for rate increases could make financial conditions even more restrictive.

The Yield Curve And Volatile Equity Rotations

We recently wrote, Are Flattening Yield Curves and Style Rotations Deceptive Omens, to help readers differentiate between monitoring financial conditions and timing market tops.

The article explains why a bear flattening of the yield curve and instability in leadership between growth and value stocks, as we are witnessing now, are both symptoms of the repricing of growth expectations and the discount rate. The lesson from that piece is that these signals describe a changing environment but do not tell you when or whether a market or economic downturn might occur.    

The last two sentences of the article sum up this headwind well:

The signals suggest the regime may be changing, and we should be prepared for that possibility. However, until that becomes more evident, we must take advantage of what the market has to offer. 

Low VIX – High Implied Correlation

Our daily Commentary from July 9, 2026, points out a wide and unusual divergence between the low S&P 500 volatility index (VIX) and the lack of correlation among the index’s individual stocks. 

As we share below, the condition represents a potential headwind, but for now, just something to be mindful of.

The low VIX (first graph) implies smooth sailing ahead, while a record-low implied correlation (second graph) suggests the market could be at risk. Goldman is hedging the risk of a correction, i.e., an implied correlation spike. Often, when implied correlation rises sharply from extreme lows, as it did in August 2024 during the yen carry trade unwind, the divergences that kept the index calm disappear. Stocks start moving together again, and most of the time they move down. This condition is not a warning to expect a market downdraft, but it does suggest that risk awareness is critical.  

Midterm Elections

Markets tend to dislike uncertainty. Accordingly, the months leading up to the midterm elections often bring volatility. This year, the potential for the Democrats to regain the House and, less likely, to take the Senate as well poses greater risks than if the Republicans were expected to maintain control of both houses.

We suspect that toward later summer and early fall, market trepidation will increase over the unknown election outcomes and what they may mean for policies and ultimately markets. Accordingly, this is likely a stock market headwind that will intensify as the year progresses.

Consumer Struggles

After two strong months of outsized growth, consumer credit, mainly credit cards, contracted for the first time in almost two years. The personal savings rate sits at 3.0%, near its lowest level since 1960. Both sets of data indicate that consumers’ wage growth is no longer keeping pace with inflation, forcing them to reduce borrowing and/or draw down savings and run tighter budgets.

This is a genuine headwind, and it isn’t going away soon. But it’s not the whole consumer story either. Unemployment remains low, and the struggle appears concentrated among lower-income individuals and parts of the middle class. Many indications of spending among upper-income households point to continued strength, and that cohort accounts for an outsized share of total consumption. Per Yahoo Finance:

A new report from Moody’s Analytics shows the top 10% of earners now account for nearly half of all U.S. consumer spending, a historic high that shows how dependent economic growth has become on wealthy households.

A squeezed lower class matters for retailers and lenders exposed to that segment, but less for the broader market, where spending is increasingly a story about who still has room to spend.

This is a headwind worth watching more closely if the unemployment rate starts to rise and financial struggles spread to higher-income earners.

Tailwinds That Could Become Headwinds Margin Debt

Record levels of margin debt have boosted demand for stocks, providing a strong tailwind for the market. As we wrote in Margin Debt Risk;

Margin debt just set another record. In May 2026, investors owed their brokers a combined $1.42 trillion, the highest in history and a 53.7% jump from the prior year.

While record and growing margin debt is a powerful tailwind, it’s a wind that can reverse direction suddenly. Per the article:

Leverage peaks near tops. Then it mean-reverts violently because the unwind forces the selling.

In addition to watching margin debt, pay attention to the most favored stocks. Today, semiconductor stocks are bolstered by a disproportionate share of the margin. If they start faltering while the broader markets hold up, this may be a sign that margin usage is about to reverse. Further, any indication of liquidity trouble in the money markets could also result in a decline in margin debt.

The Yen Carry Trade

The yen carry trade is a source of leverage pushing the market higher. As we wrote in a recent Commentary:

The carry trade thrives with a weak yen, as we have today.  Despite higher Japanese borrowing costs, the yen has depreciated significantly against the dollar, more than offsetting the higher interest costs for carry trades. A weakening yen means the trade remains profitable, and the leverage the carry trade provides to markets continues to build.

The risk today to US investors is that higher Japanese yields and a stronger yen could force a rapid, disorderly reversal of the carry trade.  Bear in mind that the more the yen falls, the more the trade grows, and the larger the unwind will be whenever the BOJ finally acts.

The Tailwind: AI Capital Spending

Working against every headwind we discussed, and others, is a single counterweight of extraordinary size: the capital spending boom tied to artificial intelligence infrastructure.

The four largest hyperscalers (Amazon, Microsoft, Alphabet, and Meta) are on pace to spend roughly $725 billion combined on capital expenditures in 2026, up about 75% from last year.  Goldman Sachs has raised its cumulative capex estimate for these four companies from 2025 through 2030 to $5.3 trillion, up from $4.5 trillion prior to first-quarter earnings.

That spending shows up directly in corporate earnings, employment in construction and semiconductors, and demand for everything from GPUs to transformers to turbines. The spending is also self-reinforcing in the near term. For instance, cloud backlogs at companies are growing, giving management the revenue predictability needed to justify increased spending. Although there is considerable skepticism about the durability of this spending cycle, it has thus far yielded results that suggest otherwise.

This is the tailwind doing the heavy lifting in the economy and market. It has been large enough and persistent enough to absorb concern about the headwinds. The question worth asking is not whether the tailwind is real but how much further it can carry markets before the headwinds start to matter more than the continued spending.

Summary: Take Advantage Or Trim Your Sails?

In meteorological speak, the Cone of Uncertainty is wide. However, just because the headwinds are numerous and the range of potential outcomes is vast, investors don’t need to trim their sails and batten down the hatches.

The more productive approach is to keep using the favorable winds while they are blowing, and to pay close attention to market barometers and remain prepared for a shift in the winds. That means participating in the areas of the market most directly tied to the AI capital spending cycle while it remains intact, while also paying attention to balance sheet quality, maintaining valuation discipline, closely monitoring technical conditions, and remaining diversified in other sectors less impacted by the AI spending boom.

Tyler Durden Thu, 07/16/2026 - 12:25
Tyler Durden

Global Investments In Nuclear Fusion Surge 69% To $4.5B

Zero Rss
3 weeks 6 days ago
Global Investments In Nuclear Fusion Surge 69% To $4.5B

Authored by Alex Kimani via OilPrice.com,

  • Private investment in nuclear fusion reached a record $4.48 billion in 2025.

  • Most fusion firms are targeting commercialization in the 2030s.

  • Major tech companies are backing fusion developers, with Microsoft signing a binding power purchase agreement with Helion, while Google, Nvidia, and other investors are funding companies such as Commonwealth Fusion Systems and Proxima Fusion.

Global private investments in nuclear fusion hit a record $4.48 billion in 2025, in large part driven by the booming energy demands of AI data centers and rising global energy security concerns.

According to the Fusion Industry Association (FIA), confidence in the viability of nuclear fusion technology is growing, with ~71% of fusion companies now expected to deliver commercial power to the grid by the 2030s.

And that confidence is now translating into tangible dollars and infrastructure with fusion companies now inking site selection and Power Purchase Agreements (PPAs) with major tech companies.  

To wit, three years ago, Helion Energy signed a first-of-its-kind power purchase agreement with Microsoft Corp. (NASDAQ:MSFT), with Helion committing to supplying Microsoft with at least 50 megawatts of electricity from a commercial fusion plant by 2028. Unlike a loose letter of intent, this is a binding corporate PPA, with Helion facing potential financial penalties from Microsoft and its transmission partner Constellation Energy (NASDAQ:CEG) if it fails to deliver on schedule. Constellation Energy serves as the primary power marketer, managing transmission from the reactor straight to the grid.

Last year, Helion broke ground on its first commercial-scale power facility dubbed Orion in Malaga, Washington. The Malaga site was strategically selected near the Columbia River to hook directly into Washington's main power delivery network, landing just upstream to power Microsoft’s massive cloud infrastructure. 

Helion is heavily backed by OpenAI CEO Sam Altman, who has injected hundreds of millions of dollars of his personal capital into the company. To keep pace with the strict 2028 Microsoft deadline, last year, Helion closed a $465 million Series G funding round led by Thrive Capital. The capital injection elevated Helion’s valuation to $15.5 billion, moving it from a speculative science venture into a heavily capitalized utility competitor.

In August 2025, Massachusetts Institute of Technology (MIT) spinoff, Commonwealth Fusion Systems, raised $863 million in a Series B2 funding, with the oversubscribed round bringing its total funding to nearly $3 billion. Some of CFS’ High-profile backers included tech heavyweights and PE firms such as Nvidia Corp. (NASDAQ:NVDA), Google (NASDAQ:GOOG) and Planet First Partners, as well as tech billionaires Bill Gates (Breakthrough Energy Ventures), George Soros's Counterpoint Global and Stanley Druckenmiller. CFS will utilize the funds to develop its proprietary fusion device SPARC, a compact, tokamak device that aims to generate net-positive fusion energy by 2027. Unlike Helion’s Orion, SPARC is a 170,000-square-foot research and demonstration facility designed to prove that commercial fusion is scientifically and practically viable. By using HTS magnets developed in collaboration with MIT, SPARC can be built at a fraction of the size and cost of traditional fusion machines. The facility's subsystems, including cryoplants and magnet power systems, are currently being installed and commissioned 

That said, CFS is also designing ARC, which could be the world's first grid-scale commercial fusion power plant. Located in Virginia, ARC is expected to generate about 400 MW of zero-carbon power--enough electricity for roughly 150,000 homes. Construction is slated to begin after permitting, with the reactor scheduled to start generating power for the electrical grid in the early 2030s.

Meanwhile, Munich-based deep-tech company Proxima Fusion recently raised €411 million, boosting its valuation to €2.4 billion and making it the best-funded and most valuable fusion company in Europe. Tech giant Google and German utility provider RWE signed on as critical industrial partners, each contributing €25 million. Proxima also received plenty of institutional support, with KfW Capital, Germany's deep-tech agency SPRIND, Burda Principal Investments, and the European Innovation Council (EIC) Fund joining alongside existing early backers like Plural and UVC Partners.

As the first spin-off from the prestigious Max Planck Institute for Plasma Physics (IPP), Proxima Fusion builds on decades of scientific breakthroughs from Germany's Wendelstein-7-X program. The funds will help accelerate the vertical integration of Proxima and the construction of "Alpha," a net-energy fusion demonstrator targeted for the early 2030s near Munich. The company is building commercial power plants based on the Quasi-isodynamic (QI) stellarator concept, a major physics breakthrough derived from the Max Planck Institute's Wendelstein 7-X programme.

Unlike most commercial fusion competitors that use a donut-shaped "Tokamak" reactor architecture, Proxima is developing stellarators. While more challenging to design than tokamaks, stellarators use a complex, twisted magnetic cage layout that prevents plasma disruptions, allowing the plant to run continuously rather than in short pulses. This makes the stellarator design highly stable and structurally ideal for providing steady-state electricity to industrial power grids.

Tyler Durden Thu, 07/16/2026 - 11:45
Tyler Durden

"Fatal Cancer On Civilization": Trump's War On Marxism Enters Action Phase As Rubio, Miller And Bessent Address 65 Nations

Zero Rss
3 weeks 6 days ago
"Fatal Cancer On Civilization": Trump's War On Marxism Enters Action Phase As Rubio, Miller And Bessent Address 65 Nations

Summary: 

  • Bessent Describes Action Phase Against Marxist NGOs Underway & Foreign Subversion Networks
  • Rubio, Miller, Bessent Address Rise Of Far-Left Terrorism To Delegations From 65 Countries 
  • Trump Team Declares War On Radical Left Groups 
Rubio, Miller, Bessent Address Delegations From 65 Countries On Far-Left Terrorism

Secretary of State Marco Rubio, White House Deputy Chief of Staff Stephen Miller and Treasury Secretary Scott Bessent addressed delegations from more than 65 countries on the alarming rise of far-left terrorism.

The broader message from all three speakers was very clear: Just as the US and its allies confronted the spread of Marxism in previous generations, Washington now believes the West needs an all-of-government, multinational strategy to counter far-left political violence, foreign influence networks and subversion movements seeking to destabilize Western institutions.

Rubio called for the civilized world to unite against an "encroaching darkness," urging all leaders in the room to defend what they have built and fight back against those who seek to destroy it. The enemy Rubio is referring to is the rise of transnational far-left terrorism. 

NEW: Secretary of State Marco Rubio calls for the civilized world to unite against an "encroaching darkness," urging nations to defend what they have built and fight back against those who seek to destroy it.

"It is easy to destroy great things. It is far more difficult to make… pic.twitter.com/G14GjBSIXE

— Fox News (@FoxNews) July 16, 2026

Rubio said, "In the United States, the share of left-wing terrorist attacks and plots has risen to levels not seen in DECADES. In Germany, far-left violence has jumped by more than 40% in just the last year alone."

🚨 JUST IN: Marco Rubio is throwing Democrats into a frenzy by dropping this truth nuke that terrorism is COMING FROM THE LEFT

"In all-out assault on our immigration officers, sniper attacks, explosives, armed ambushes, a transgender shooter opening fire on Catholic elementary… pic.twitter.com/jENXMAqe1U

— Eric Daugherty (@EricLDaugh) July 16, 2026

Rubio added that Antifa is being directly aided by Iran and Cuba through a massive international network that seeks to attack the West with terrorism and propaganda.

Marco Rubio says Antifa is being directly aided by Iran and Cuba through a massive international network that seeks to attack the West with terrorism and propaganda.

"They despise the West because the West is great." pic.twitter.com/20o7JSLdKY

— Shadow of Ezra (@ShadowofEzra) July 16, 2026

After Rubio, Miller addressed the hundreds of high-level officials in the room, saying, "Here in the United States, we have taken the necessary and essential action formally recognizing left-wing violence as a form of political terrorism that is a direct threat to our national security and the survival of our republican form of government."

Stephen Miller: "Here in the United States, we have taken the necessary and essential action formally recognizing left-wing violence as a form of political terrorism that is a direct threat to our national security and the survival of our republican form of government." pic.twitter.com/MMvYho2t87

— Breaking911 (@Breaking911) July 16, 2026

He called left-wing political violence: "This is a fatal cancer to civilization… The greatest risk that we have is that our institutions have grown too soft and too cowardly to be able to defend themselves against a mortal threat."

Stephen Miller on left-wing political violence: “This is a fatal cancer to civilization… The greatest risk that we have is that our institutions have grown too soft and too cowardly to be able to defend themselves against a mortal threat.” pic.twitter.com/RJCZDMAfCX

— Breaking911 (@Breaking911) July 16, 2026

Last but not least, Bessent then describes how the US Treasury will dismantle the foreign subversion networks that use nonprofits to wage war against the US:

Treasury is expanding its efforts to identify organizations that abuse charitable and nonprofit structures as vehicles for illicit finance.

We are examining where tax exempt status has been exploited, where charitable entities have become financial conduits for foreign influence activity and how those entrusted with stewardship of these organizations have instead enabled violence, where the evidence leads we will not hesitate to follow and of course we will hold these organizations, officers, directors, accountable and just as financial institution must know their clients they must know their grantees.

That work is well underway.

At President Trump’s direction, @USTreasury is bringing the full weight of our authorities to defend the integrity of the U.S. and global financial systems.

We will identify illicit funding, however artfully it is concealed. We will dismantle the networks that sustain political… pic.twitter.com/oS1ri4kZeX

— Treasury Secretary Scott Bessent (@SecScottBessent) July 16, 2026

All in all, the meeting should be viewed as a signal that the Trump administration has entered the action phase to dismantle the command-and-control structures of foreign subversion networks routed through Marxist groups and nonprofits seeking to destabilize the West. 

Watch Live: Rubio, Bessent Convene 65 Nations For Global Crackdown On "Far-Left Political Terrorism" 

Secretary of State Marco Rubio will host delegations from 65 countries in Washington on Thursday morning to coordinate a specialized international response to combat what the Trump administration describes as a "resurgence" of far-left political terrorism.

Watch Live here (due to start at 0910ET):

CNN cited a senior State Department official who said the delegations will come from "across the Western Hemisphere, Asia, Europe, and beyond."

The meeting will focus on countering the spread of far-left political violence and terrorism across the West, including riots, attacks on critical infrastructure and acts of industrial sabotage. 

Here's color from the outlet on today's meeting:

According to sources, many of the delegations will not be led by the foreign ministers of the countries, but rather more working-level and technical officials. Several cited scheduling, with invitations to the event only being issued at the beginning of July.

Countries that had worked with the administration on the topic were among those invited, the official said, noting they've had "very productive engagements with Germany, with Greece, with Italy, and that’s often where the problem is most pronounced in Europe."

Another State Department official told CNN that Rubio plans to describe left-wing terrorism as "the result of a unique evil rooted in a deep resentment towards civilization."

The threat of left-wing terrorism "has not really been addressed collectively in an effective way," the official said.

According to the official, partners have said they "have a handle" on other forms of political violence but "this one is more difficult for us."

We wrote one month ago: 

We noted at the time, "While the cases appear separate, both point to a broader concern: revolutionary and radical-left rhetoric is increasingly bleeding into an alarming pattern of real-world violence, with younger and younger extremists resorting to violence targeting wealthy individuals or even right-leaning political figures."

Far-left extremist Hasan Piker calls on his followers to kill capitalists... 

Hasan Piker calls on his followers to kill capitalists:

“Yeah kill them! KiII those motherfuckers and murder those motherfuckers in the streets. Let the streets soak in their fucking red capitalist blood, dude.”

Democrats are campaigning with him. pic.twitter.com/YiZxGgRkgc

— Eyal Yakoby (@EYakoby) April 9, 2026

Treasury Secretary Scott Bessent and White House deputy chief of staff Stephen Miller are also expected to be at today's meeting. 

Bessent signaled in late May to reporters that "in the weeks and months" there will be a lot to talk about in terms of dark-money-funded NGOs fueling chaos and revolution in the US.

Ahead of today's meeting, a State Department official spoke with Breitbart News about foreign subversion networks sowing chaos in America:

"The State Department will be issuing a report detailing the Cuban regime's longstanding campaign to foment left-wing extremism in the United States and internationally. The report finds that for nearly seven decades, the Cuban regime has played an indispensable role in nearly every notable far-left insurgency, revolution, and militant movement across the Western Hemisphere and beyond."

ZeroHedge was first to point out in late 2025:

Last week, Jim "Fergie" Chambers, the Communist centi-millionaire and heir to the massive Cox media fortune, was arrested in Spain at the request of the US Justice Department and is awaiting possible extradition on federal charges linked to "international money laundering… with the intent to provide material support to and resources to foreign terrorist organizations." 

City Journal's Stu Smith wrote in a recent report, "Chambers is one of the main funders of America's radical Left. His money has flowed to a host of projects in the "anti-imperialism" organizing space," adding, "Chambers claims that he and Singham are effectively the two primary financiers of the US radical left." Despite this, the two have apparently been at loggerheads—a conflict that has now gone public."

And all of this raises one obvious question: Why is the Democratic Socialists of America a "partner" of ICAP, a US-sanctioned, Castro-era Cuban organization created to export Marxist ideology and cultivate foreign political networks?

ICAP can be viewed as an ideological intake valve, providing political cover and access points that could be exploited for influence or intelligence operations.

That relationship provides new context for statements from DSA leaders, such as: "The most important thing we can do is take that American empire down from within."

You know it's bad for Democrats when one of their own has to write a WSJ op-ed, calling for "Lawmakers, law-enforcement agencies and journalists should investigate the DSA to see if it is being funded by foreign governments and interests."

Tyler Durden Thu, 07/16/2026 - 11:34
Tyler Durden

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