Black Monday 2.0: Bloodbath In Global Markets Today | Michael Gayed
Speakers
Michael Gayed
— Founder, The Lead-Lag Report
David Lin
— Founder & Host, The David Lin Report / ex-Anchor, Kitco News
Summary
Michael Gayed joins David Lin after a sharp Sunday-night selloff in US equity futures to discuss whether markets face a Black Monday-style event. Gayed argues the crash is part of a crash-stocks-to-save-bonds dynamic that should favor long-duration Treasuries and flag further credit-spread widening. He sees a whipsaw risk in equities, an eventual small-cap buying opportunity, near-term pressure on gold, and a possible Bitcoin hedge if counterparty risk rises.
- US equity futures were sharply lower Sunday night amid tariff-driven global market stress.
- Michael Gayed says the move fits his long-running thesis that stocks are crashed to force a flight to safety into bonds.
- He favors long-duration Treasuries as the cleanest risk-off asset and says his rules-based funds are positioned there.
- He warns equities may whipsaw before another leg lower because valuations remain high and credit spreads are too tight.
- Small caps are described as a future generational buy once lower yields and Fed liquidity arrive, but not yet.
- Gold is now seen as vulnerable to margin-call selling, while Bitcoin could act as a conditional counterparty-risk hedge.
- Credit spreads, junk bonds, the yen, utilities, and lumber/gold are discussed as key risk-off indicators.
Ideas
Long Treasuries benefit from crash-driven safety bid
His core thesis is that market forces crash stocks to force a flight-to-safety bid into Treasuries, lowering long-duration yields so the US can refinance debt. He argues long-duration Treasuries are the pristine risk-off asset and the only area he wants to be in; his rules-based funds have been positioned in long-duration Treasuries, and his bond ETF JOJO has benefited from risk-off/junk-off flows. If credit spreads blow out, he expects yields to fall further and sees a trade there.
US equities overvalued; whipsaw before lower
He sees US equities as still overvalued, with credit spreads too tight and small caps warning of recession/default risk, so the selloff is not a generational buy yet. Near term, he warns of a violent whipsaw that could rally and suck retail back in, but he expects another wave lower because valuations and credit conditions remain unsupportive.
Reverse carry unwind supports stronger Japanese yen
He says the yen was rallying before the equity crash, consistent with a reverse carry-trade unwind, and that Japan/reverse carry trade is a key trigger. He argues Trump tariff dynamics accelerate the reverse carry trade because crashes are deleveraging events, implying continued yen strength.
Credit spreads to widen; short junk bonds
He argues credit spreads are still too tight and disconnected from small-cap default risk, and expects them to widen substantially as the credit event plays out. He points to the May 2010 flash crash, where junk debt sold off before equities; he says if JNK/HY junk ETFs fall 3-5% while long-duration Treasuries rise, that is a multi-sigma spread blowout and a warning/trigger for a deeper equity break.
Small caps are future generational buy
Small caps hold the key and have been screaming default/recession risk; they need lower yields to survive and allow zombie companies to refinance. He expects them to be saved after the credit event, creating a generational buying opportunity and making small caps a big winner coming out of this, but says it is not yet time because yields have not fallen enough and the Fed has not intervened.
Avoid gold; margin selling hits winners
Although he was bullish on gold since October 2023 and says its prior warning was valid, he now avoids gold because manic optimism is high and margin calls force investors to sell winners for liquidity; gold is one of the few winners left, so he expects selling pressure.
Bitcoin may hedge rising counterparty credit risk
He is not anti-Bitcoin but rejects the store-of-value narrative. If credit risk and counterparty risk rise, decentralized Bitcoin could act as a risk-off hedge or diversifier, though it will not be as defensive as Treasuries.
