“It’s Not the Same Dollar”: The Big Lie Behind the Stock Market Rally

The stock market rally may not be as robust as it appears, according to technical analyst Francis Hunt. He argues that the rally is driven by the weakening purchasing power of fiat currency, rather than genuine growth. Hunt contends that the post-2020 bond market downturn signals the end of a 40-year debt bull market, as governments and institutions shift towards preserving capital in hard assets.

This shift has altered how investors interpret equity gains, with nominal wealth expanding while real wealth contracts. In this new environment, gold is seen as the pressure valve due to the debt crisis. Hunt believes that capital is prioritizing preservation over return, and investors are asking what cannot be printed, diluted, or blocked.

The treasury market is depicted as a one-way architecture with easy entry but constrained exit. Instead of liquidation, creditors are pushed towards swap lines, repo facilities, and borrowing against existing collateral. This creates a manufactured asymmetry where buyers are welcome, but sellers are constrained. Hunt cites several instances where the system has constrained liquidation and extended liquidity against pledged assets, such as the U.K.'s 2022 liability-driven crisis and strains in the California State Teachers' Retirement System.

He warns that Japan, with over $1.1 trillion in U.S. Treasuries, could be the most critical test case, as it is large enough to matter but constrained enough to be trapped. Hunt suggests that limited borrowing capacity against bonds could lead to a violent unwind in the carry trade, draining capital from global risk assets and pushing Treasury yields higher.

He maintains that the standard textbook logic of higher yields attracting durable inflows may not apply in this scenario. Hunt's analysis focuses on comparing equities against gold rather than against the dollar, suggesting that U.S. stocks peaked in 1999, staged a secondary high in 2021, and now appear vulnerable to a longer secular reset.