The U.S. Dollar is hanging by a thread, and the 10-Year Treasury Yield is flashing a massive recession warning sign. In this video, Chief Market Strategist Gareth Soloway dives deep into the currency and bond markets to expose the hidden vulnerabilities in the U.S. economy. Video by Gareth Soloway.
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While the DXY has chopped within a broad range for years, Gareth zooms out to the macro weekly chart to reveal a critical 20-year trendline dating back to the 2008 Financial Crisis. The dollar is violently hammering on this support, and Gareth explains why uncontrolled fiscal spending, massive debt, and a compromised Federal Reserve are creating the perfect storm for a breakdown by year-end 2026.
But it’s the 10-Year Yield that is telling the real story. Gareth breaks down why falling yields are no longer a "bullish" signal for the stock market. Instead of celebrating rate cuts, the bond market is pricing in a severe economic slowdown. And when corporate profits drop, the S&P 500's current multiple becomes completely unjustified.
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The "Twist" Recession Warning
As of late February 2026, the 10-Year Treasury Yield is not currently in a traditional inversion—the most famous recession warning—but is instead undergoing a rare market-driven "yield curve twist" that has investors on high alert.
Financial analysts are closely monitoring these specific "red flags" that complicate the typical recession narrative:
-The "Warsh Shock": The nomination of Kevin Warsh to lead the Fed in May 2026 has signaled a shift toward "Sound Money," leading markets to price in a more disciplined, rule-based monetary policy that may avoid bailouts.
-Duration Hedging: The slide in the 10-year yield from its January peak of 4.3% suggests investors are paying a premium for long-term bonds to hedge against potential recession or geopolitical shocks.
-Tariff Uncertainty: A 15% global import surcharge (invoked under Section 122) has re-anchored inflation expectations, creating a "tariff cliff" for July 2026 that could either cause a disinflationary shock or cement higher rates.
-Bank Margin Squeeze: While the curve is not inverted, it is flat or "twisting," which impairs the traditional banking model and evaporates net interest margins for mortgage lenders.
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