Dimon warns rates could soar. Zahn is buying bonds.

Transcript

Tom Jamie Dimon is back with the fire and brimstone, and buddy, he is not pulling any punches on where interest rates are headed.

Marie See, this is exactly what I mean — everyone is so focused on the Fed's next pivot that they’re ignoring the structural rot Dimon is pointing at.

Gerald Yeah look, Jamie’s basically turned into the market’s self-appointed pest control officer, hasn't he?

Tom Hah — yeah, yeah, he really has.

Marie Alright, welcome to Investment Flash, the London Edition for Thursday, May twenty-first. I’m Marie, joined by Tom and Gerald, and we are sifting through a very messy bond market today.

Tom Messy is an understatement, Marie. We have Dimon saying rates could go much higher, while the long-term Treasury ETF is sitting just one percent above its fifty-two-week low.

Gerald The thing is, the bear case for bonds is already so heavily priced in after that three and a half percent slide year to date.

Marie Wait — wait a second, Gerald. Did you see that MarketWatch piece about the 'credit termites'?

Gerald I did. It’s a sharp take — basically saying opaque AI loans and excessive leverage are hollowing out the economy from the inside.

Marie Exactly! It’s not just about the macro cycle anymore. These termites are a structural vulnerability that could force a massive flight to safety into Treasuries if things snap.

Tom No way, if that happens, the short squeeze on bonds would be absolutely violent.

Gerald Honestly, we’re already seeing some smart money move. Look at David Zahn — the man who famously called the gilt rout.

Tom Right, he’s actually buying UK gilts now that they’re hitting a six percent yield?

Gerald Yeah look, the UK gilt ETF is down over thirty-three percent in the last year. Zahn thinks the pain is largely in the price, and honestly, six percent is a hard number to ignore for a sovereign bond.

Marie I'm going to push back here. Just because it’s down thirty-three percent doesn't mean it can't go lower if inflation stays sticky in the UK.

Gerald Fair enough, but Zahn has the track record. When he starts buying the dip, I usually stop mocking it.

Tom Ha — fair point. But speaking of things that only go up, look at real estate. Despite everything we just said about rates, the Vanguard real estate ETF is near its fifty-two-week high.

Marie Hold on, Tom. That’s because the market is pricing in a soft landing. If those 'termites' I mentioned earlier start chewing through the drywall, real estate is the first thing to crumble.

Gerald To be fair, the charts are showing real momentum. Both major real estate ETFs are up about nine percent year to date.

Tom Exactly.

Marie One hundred percent.

Gerald That's the whole story.

Tom See? Even Gerald can't deny the price action buddy! And it's the same in biotech. The SPDR biotech ETF jumped nearly four percent last session.

Marie Look, I’m glad investors are finally looking at fundamentals in biotech instead of just obsessing over FDA headlines.

Gerald Wait, calling the bottom on biotech again, Tom? That’s what — six bottoms this cycle for you?

Tom pff, okay, you got me there. But look, it’s up eight percent year to date off a very low base. There’s room to run.

Marie I actually agree with Tom on this one. If the regulatory chaos is being tuned out, the innovation in the pipeline finally gets to take center stage.

Gerald Alright, but we need to talk about Germany. The gas storage levels are under thirty percent full, and with the Iran conflict still squeezing supply, we are looking at a potential winter crunch.

Marie That is a massive headwind for the DAX. German industry can't handle another massive spike in energy costs.

Gerald Exactly. The DAX is flat year to date while other indices are flying. If you’re looking for a place where the wheels could come off, it’s German industrial equities.

Tom So you’re saying buy the natural gas fund? It’s down about five percent this year.

Gerald Yeah look, if the supply fears get real, that natural gas ETF could rebound sharply. It’s a classic hedge against a cold winter and bad geopolitics.

Marie Not so fast — before we get too deep into energy, we have to mention the trade deal. Beijing is saying they’ve agreed to lower tariffs on thirty billion dollars worth of goods with the US.

Tom And farm products are right in the middle of it! The agribusiness ETF is already up ten percent year to date. This tariff news is pure fuel for that fire.

Gerald It’s a nice headline, but thirty billion is a drop in the ocean for total US-China trade. That’s why the China Large-Cap ETF is still just a hold — it’s not enough to move the needle.

Marie Right, and that’s the problem. We’re seeing these little pockets of relief while the broader emerging markets are under massive pressure from central bank interventions.

Gerald Honestly, the swap markets are already pricing in a rate hike for South Africa. The South Africa ETF is down over one percent year to date and could fall further if they have to tighten to save the currency.

Tom Man, it’s just a sea of red for EM while US tech is out here throwing a party. But even the party might be getting too crowded.

Marie You’re talking about the semiconductor ETF, aren't you?

Tom I am! Look, I’m the biggest bull on the planet, but it’s up fifty-one percent year to date. It is one hundred and forty-one percent above its fifty-two-week low.

Gerald Oh, that’s brutal. Even Tom is getting nervous? The end must be near.

Tom Alright, alright — but seriously, Bloomberg is flagging that positioning is incredibly crowded and rate volatility is surging. If the risk-on trade unwinds, the semis are going to be the exit door everyone tries to run through at once.

Marie See, THIS is what I mean. We have this massive fragmentation. Bonds are at the bottom, semis are at the moon, and nobody is looking at the dollar.

Gerald That’s the missing piece in the commentary today. If the Fed stays hawkish and the dollar index starts climbing again, all these fragile recoveries in emerging markets are going to evaporate.

Tom No way, the dollar has been so quiet lately.

Marie Quiet until it isn't, Tom. As always, none of this is investment advice, we are just three people looking at the same screens you are.

Gerald And sometimes those screens tell us that analysts revising price targets after the fact is basically the only free retirement plan left.

Tom Hah — yeah, that’s fair.

Marie If you’re finding the show helpful, hit follow on Spotify or check out investmentflash.com for the full digest with all the charts and sources.

Tom We’ve got a big afternoon ahead of us as the US markets open up and digest these bond warnings.

Gerald Right. We'll see if the termites have actually started on the foundation yet.

Marie We'll be back for the New York Edition, later today at nine a.m. New York time.

Tom Catch you then, buddy!

Gerald Cheers.