A Confluence of Triggers: Correlating a Collapse of All Major Asset Classes

Posted May 1, 2024 By Dan Wagner and Jeff Liautaud

Summary: Spend Agenda is a phrase coined by Business Owners Charter, Inc. (“BOC”) for recurring deficit spending threatening systemic risk. A recent confluence of domestic and global factors including crowding in short-duration US Treasury markets, destabilizing Spend Agenda, persistent inflation, and conflict in the Middle East if negatively escalating may permit a correlated collapse of all major asset classes.

A Crowded Trade

In the 90-day period ended 4/1/2024, 90% of currencies measured lost value against the dollar, with an average loss on the dollar of all currencies coming to -2.7%. This means the dollar gained +2.7% in value during the 90-day period, indicating significant movement into the US dollar by foreign investors whose local currency is losing value by comparison.

This appreciation has not gone unnoticed by the world’s asset managers. In this Bloomberg article, a portfolio manager from large European Union bank BNP Paribas Asset Management is quoted saying, “If you’re a global allocator and running your portfolio, what a slam dunk to improve your risk-adjusted returns: buy shorter-term US debt, unhedged.” This may accelerate a crowded trade in short-dated US Treasury debt offerings of 1 year or less. Yields on 1-year US Treasury Securities are the highest they have been since July 2007, and a strong US dollar gives foreign investors an additional boost as they convert from US dollars back to their local currency.

BOC proprietary research shows that during a period from 1/1/2024 through 4/1/2024, compared to the same period one year ago total Treasury Debt Offerings were higher by 51%… of which 60% was in the crowded trade short-term debt offerings.

Spend Agenda

The Spend Agenda is escalating causing the 51% increase during the period. Funding the ongoing ever-increasing Spend Agenda is destabilizing.

Emerging Markets

This CNBC article explains that a strong US Dollar is problematic for emerging markets since their debts are frequently priced in US Dollars, making those debts more expensive to service. High US interest rates are similarly problematic because they cause capital flight as investors opt for better returns in the US, which further crowds short-term US Treasury debt offerings.

Persistent Inflation

The Consumer Price Index (“CPI”), a price index of a basket of goods and services that helps quantify inflation, has increased over the last two announcements:

  • Jan’24: 3.11
  • Feb’24: 3.17
  • Mar’24: 3.48


Another measure of inflation, the Personal Consumption Expenditures Price Index (“PCE”), has increased during this period as well:

  • Jan’24: 2.4%
  • Feb’24: 2.5%
  • Mar’24: 2.7%


One of the US Federal Reserve’s (“the Fed”) two mandates is price stability, and stubborn inflation may cause the Fed to hold interest rates at the current level or even raise them. Treasury prices are inversely related to interest rates, called yields, so an increase in interest rates would cause the price of any current US Treasury to drop.

Conflict in the Middle East

On 4/13/2024, Iran launched an aerial attack against Israeli military facilities, consisting of hundreds of drones and missiles. Israel seemingly counterattacked Iran on 4/19/2024 with a drone strike of its own. Presented with this high-risk scenario, BOC exited the market on 4/19/2024 into BlackRock Ultra Short-Term Bond ETF (symbol ICSH) in portfolios for all risk tolerances while holding 13% bitcoin in the moderate aggressive suitable portfolio. On 4/25/2024, the threat of escalating war was seemingly reduced and we re-entered the market with a re-entry cost of -0.62%. War risk aside, the economic implications of drone warfare are profound.

According to Politico on 4/23/2024, US congress just sent a $95 billion foreign aid bill to Biden for approval.  Cfr.org estimates that the US has already sent approximately $75 billion in aid to Ukraine since February 2022, bringing total foreign aid spending up to $170 billion thus far.

Drones are changing the economics of warfare in the Middle East however, as documented in this video report by Bloomberg on 4/18/2024. Israel’s cost of defense was estimated to be $1.5 billion, roughly 500 times more expensive than the estimated $3 million Iran spent to launch the aerial attack. Enemies of US allies can exert incredible reverse leverage on the US and exacerbate the Spend Agenda through foreign aid.


The confluence of crowding in the short-term US Treasury market (where participants are sensitive to interest rate increases), accelerating high inflation (which could prevent the Fed from decreasing interest rates), a strong US Dollar (which could force emerging market nations into more expensive debt servicing and capital flight), and potentially escalating conflict in the Middle East (which is itself inflationary due to the high cost of defense) may be the “perfect storm” for financial markets, leading to a correlated collapse of all major asset classes.

End of Special Report 

Our BOC Portfolio Newsletter Special Reports cover matters that superior investing returns may require. For example, a 2008 Special Report thesis stated: “With respect to the 2008 bailout) the money to fund $1.4tn (trillion) dollars won’t be there, much less $9tn to $16tn dollars. If the money isn’t there and the government still wants its stimulus, the government has no choice except to print currency.”

And as predicted the money really wasn’t there. Printing fiat currency to fund the bailout was present, and was given the name Quantitative Easing.

Whether you are an Outsourced Chief Investment Officer (OCIO), Registered Investment Advisor CEO, Franchise Owner, a provider of a separately managed account (SMA), or other type of Financial Professional, we are an investment methodology fiduciary to investment firms like yours serving all risk tolerances. Call Dan at 708-825-7301 or email Dan@BusinessOwnersCharter.com.

BOC Portfolio Newsletter

About Page