My Financial Market Predictions for the next 2 years + Investment implications

Over the next two years, policy chooses stability over truth and control over fairness—which means short shocks, quick backstops, sticky 3–4% inflation.

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Macro regime (2026 Q4 checkpoint)

• Inflation: sticky 3–4% band in US/EU/UK (financial repression via mild negative real rates).

  • Odds by end-2026: Band 3–4% (55%), disinflation to 2–2.5% (25%), re-accel >4.5% (15%), deflation shock (5%).

• Policy reaction function: Short, intense “fix-it” shocks, not prolonged pain. Facilities, bill-heavy issuance, swap lines, accounting relief — then ratchet the controls.

• Liquidity: “Managed choppy”—net supportive over the full window. Expect intermittent drains (TGA rebuilds/coupon-heavy quarters) countered by bill skew and facility jawboning.

Rates / Bonds / USD

• Front-end: 2–3 cuts total by end-2026, then pause; real front-end ≈ flat to mildly negative.

• 10Y UST: 4.0–4.8% most of the time; term premium stays jumpy around coupon-heavy quarters.

• Curve: mild bull-steepen on growth scares, then re-flatten as bill supply + CB put steady funding.

• USD: sideways-to-slightly softer DXY −3% to −8% over two years, punctuated by brief funding spikes on shocks.

Equities (US-led)

• Index level: grinding up, factor narrowness persists. Big Tech + state-embedded software carry the tape; cyclicals lag unless China credit surprises.

• Multiple: supported by repression + liquidity management; compresses temporarily during coupon deluges and MOVE spikes.

Leaders (structural):

• State-embedded software: Palantir, Microsoft (Gov/Entra/Compliance, Azure), Palo Alto Networks (platformized security).

Laggards (structural):

• Pure “open” AI without governance/audit, labor-heavy Systems Integrators, levered small caps into issuance spikes.

Expression: long leaders; underweight/avoid Systems Integrators and ungated AI. Add on volatility spikes; overwrite calls on “clarity” ramps.

AI & enterprise spend

• Revealed preference: buyers want admissible AI (lineage, rollback, evidence), not leaderboard demos.

• Spend mix: security/identity/compliance/observability outgrow raw model spend; inference unit costs fall but platform Total Contract Value (TCV) rises via governance SKUs.

• Winners: platforms that ship policy knobs and artifacts a General Counsel can defend (PLTR/MSFT lead).

Payments rails: stables → CBDC gravity

• Stablecoins: continue institutionalization (Treasury-backed reserves, bank partnerships).

• CBDC: pilots expand; most utility delivered via stablecoin/tokenized deposit corridors first.

• Implication: Medium-of-Exchange centralizes on supervised rails; privacy coins remain niche; BTC tolerated mainly as Store-of-Value wrapper.

Bitcoin

• Base path: managed cyclicality; paper share (ETFs/futures) rises → realized volatility declines; upside corridors capped during leverage frenzies via liquidity hunts; sharp drawdowns still permitted when narrative cover exists.

• Price path (2y view): broad $85k – $180k corridor with 1–3 engineered breakouts/fakeouts; tails on policy moments.

• Alpha: buy fear (policy/legal scares), sell/overwrite into “regulatory clarity” pops; maintain a self-custody core for regime-break convexity.

Commodities

• Gold: benefits from financial repression + central-bank buying + “shadow reserve” meme; new range higher.

• Energy: geopolitical floor; upside tails on shipping or supply events; OPEC discipline holds.

• Copper/critical minerals: constrained capex + electrification keep a bid; China credit impulse still the key swing.

Credit

• Investment Grade: stable; spread volatility around issuance windows.

• High Yield: defaults bump but remain managed (private credit refis, amend-extend culture).

• Private credit: keeps taking share; regulators tolerate because it socializes risk off banks.

Europe / UK / Japan / China

• EU/UK: same repression band; increasing compliance spend (AI governance, provenance, identity).

• Japan: Yield Curve Control (YCC) flexibility but still suppresses term structure; steady equity flows from governance/capex reforms.

• China: targeted stimulus waves; credit impulse choppy; equities trade policy headlines; commodities move on infra bursts.

Shocks they’ll use (and how they’ll “solve” them)

• Cyber/settlement incident: mandate identity/provenance; boost security spend; market backstopped in <2 weeks.

• Stablecoin wobble: “clarity” laws; push tokenized deposits; continue paperization.

• Treasury market stress: Standing Repo Facility/Buybacks/bill skew; fast restoration of function.

• Bio scare: re-enable public-health rails; Palantir/public-health stack re-ups.

Probabilities (next 24 months)

• Soft-repression baseline (sticky 3–4% CPI, managed liquidity, equities grind up): 55%

• Crisis-and-ratchet (short shock → new standards → higher multiples for compliance platforms): 30%

• Growth scare mini-recession (brief, policy-cushioned): 10%

• Hard disorder (global funding fracture): 5%

Positioning checklist (what I’d actually do)

1. Core longs: PLTR > Bitcoin > Gold > MSFT (Gov/Entra/Azure) > PANW.

2. Event playbook:

   • BUY: VIX>35 + MOVE>130 + Net Liquidity improving within 2–3 weeks → scale into core.

   • TRIM/OVERWRITE: “clarity” PR waves, big award headlines, index inclusions.

3. Rates/FX hedges: keep light duration hedges for term-premium spikes; hold USD only into funding stress.

4. BTC sleeve: self-custody vault regime-break convexity.

5. Avoid: leverage, story-only AI, body-shop Systems Integrators, small caps reliant on cheap coupons during heavy issuance quarters.

Leading indicators to update the view weekly

• US Net Liquidity (Fed BS − TGA − RRP), 4-week change

• Bills vs coupons issuance skew

• PSC/LPI (policy synchronization, lineage verbs in RFPs/laws)

• VIX/MOVE + DXY

• China credit impulse (for commodities/cyclicals)

Bottom Line

Over the next two years, policy chooses stability over truth and control over fairness — which means short shocks, quick backstops, sticky 3–4% inflation, and rising spend on identity/compliance/decision lineage. That flow structurally favors state-embedded software (Palantir/Microsoft first), platform security, and provenance rails. Read the plumbing and the standards — not the speeches — and get paid to be the only participant who doesn’t have to sell when Value at Risk (VaR) screams.

None of this should be considered investment advice.

More context:

• Gross Consent Product (make informed investment decisions)

• How Financial Repression actually works + Investment implications

• Why this time is different in terms of the “debt crisis”