Is Bessent’s Bridge long enough to prevent a deep correction in stocks, part III?

Happy Monday out there, Team 42. It's your skipper here, Darius Dell, to present our Macro Minute for Monday, August 24th, 2026. Hope everyone had a great weekend. So as always, we'll start with the executive summary from today's lead-off morning note, so let's dive right in. Today's key macro question is, is Besson's bridge long enough to prevent a deep correction in stocks, part three? The short answer is global financial markets are currently assigning a 61% probability of this bullish outcome, according to our global macro risk matrix market regime now casting process, up 700 basis points week over week. The positive delta indicates the bridge is growing longer, which is bullish for risk assets and bearish for the US dollar. The truth is we don't know. Anyone who thinks they know may be suffering from the illusion of validity, which is a symptom of not having performed enough research. For those unfamiliar, our Besson's bridge theme is a data-driven research view that the treasury secretary would do whatever it takes to quash financial market volatility emanating from the bond and currency markets. The likely goals of this strategy are simple from the administration's perspective. In order of importance, number one, prevent capital markets indigestion from causing the US to fall behind China in the US's manufactured AI race, aka marketing scheme. Number two, create a bridge from today's Fed credibility concerns to this winter's likely unveiling of surprisingly dovish monetary policy reforms. And then finally, number three, score points with US voters on the affordability, as well as the value of the stock market. And number four, reduce the risk of a market crisis ahead of the midterm elections. Refer to our August 8th and August 21 around the horns and August micro scouting report for more details. As always, a wrap up with a question from our community. This one's titled Treasury Bonds versus AI in the battle for capital. It says, "DD and Kayla Scanion have both said that the bond market and AI are both jockeying for the same dollars and bonds are losing if I'm picking up on this right. So do we think Big Brother is going to do something to kill the AI boom, and thus, the competition for capital? I don't know. So in our view, no, we don't think they're going to do anything. In our opinion, we think perpetuating this US, this manufactured US AI race with China and ensuring that the US does everything from a policy standpoint to quote unquote win this manufactured race, in our opinion, is the number one goal of all these policies, at least at the current juncture. Obviously, there's this increased competition for capital is causing interest rates to back up. It's causing our startup back up. And ultimately, it's making the thing in the Fed accommodative at the margins. And so that accommodative policy and the function of the Fed's policy rate level being too low now in the context of this backing up of our star, our math has it at about plus 50 to 75 basis points over the past, call it six months or so. And so now that the Fed is modestly accommodative, it's now pushing up, applying upper pressure on the economy, upper pressure on bond yields. And so ultimately, and inflation, obviously. And so that, in our opinion, is the biggest issue here. If that is the biggest issue, then what Besson is trying to do is essentially is make it so that the bond vigilantes don't have to sell as many bonds in the context of helping the hyperscalers and all the companies in and around this kind of AI capex bubble continue to achieve, source the finance that they need to keep the game going. That in our opinion is by far the number one goal. Obviously, in our view, having done all the research required to arrive at the conclusion that the Fed's policy reform that they're likely to unveil this winter are likely to be surprisingly dovish on a net basis relative to current market pricing and expectations, then that's obviously an added bonus in the context of trying to kind of keep the bond vigilantes at bay, because the bond vigilantes got wind of what we've already gotten wind to. And maybe they have already. Obviously, gold's rallying, Bitcoin's rallying, the bonds are selling off. Maybe the bond investors have already realized that, "Hey, this is a US administration that's going to kind of co-join Fed and fiscal power through monetary policy in ways that debase the dollar and ultimately financially depress fixed income investors from achieving the kind of return that they need to continue capitalizing this market." And so we've been saying, you have to expect large quantities of financial repression, large quantities of monetary debasement for years in the context of what has been our core research thesis, which is that there's a geopolitically driven supply-demand imbalance in the treasury bond market. And lo and behold, three, three and a half years later, it's now front page news. And we're still keeping front page news intermittently for at least the next five to 10 years. So we'll wrap it up there. Darius Dett here presenting our Macro Minute for Monday, August 24th, 2026. Best of luck out there today. We'll catch you back here tomorrow. Cheers. - If you enjoyed this content, please remember to like and subscribe. Thank you. This content is for informational purposes only and does not constitute an offer or a solicitation. Reliance upon the information in this material is at the sole discretion of the viewer or listener. Investing involves risks. 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