Risk update

Complex theories of what will happen next in financial markets seem pointless to me. Risk is always the first to fail, and this time it is no different. We went into this epic commodity shock (and not only energy) with the U.S. economy overheating. Wage pressures were accelerating, inflation broadening, and consumer sentiment collapsing. Corporate margins have been a key theme on this TL for over 9 months now and time is finally up. The combination of rising energy costs together with mortgage rates will be the final nail in this cycle’s long expansion. An energy crisis alone would have been enough to trigger a massive credit event. Combine remaining commodity complex imploding, sanctions triggered credit losses, risk of multiplying conflicts in many EM (triggering sovereign credit events)