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US 30-Year
Above 5.00%
First time in nearly two decades
US 10-Year
Around 4.60%
Near one-year high
Fed Path
No cuts
A hike is now back on the table
What Just Happened
The US 30-year Treasury bond broke above 5% for the first time in nearly two decades. The 10-year sits near a one-year high. CPI just printed the hottest reading in nearly three years. Markets that expected Fed rate cuts this year are now pricing in the possibility of a hike.
This is not a short-term headline. It is a change in regime.
Three Forces, One Direction
Inflation Is BackBack-to-back hot CPI and PPI prints have re-priced the entire curve. The disinflation story has stalled.
Oil Fuels the FireMiddle East tensions keeping crude elevated, feeding directly into global inflation expectations.
Fed Credibility Is Being TestedBond market demanding more compensation to own duration amid sticky inflation, structural deficits, and policy uncertainty.
What This Breaks
When the risk-free rate pays 5%, the math on owning expensive US equities changes. The AI-led indices are priced for a world that may no longer exist. Good companies can still trade at lower prices when the discount rate moves higher.
The classic 60/40 portfolio is also under pressure. Bonds do not reliably hedge stocks when inflation is the problem. In that environment, both sides of the portfolio can fall together.
The Buffett Indicator Is Flashing Red
The Buffett Indicator | Market Cap to GDP
May 2026 | More than 2 standard deviations above the mean
Warren Buffett's preferred valuation measure, total US market capitalization divided by GDP, sits at roughly 234%, the highest reading in history. It is now well above the dot-com peak that preceded a 78% NASDAQ drawdown, and roughly double the 2007 reading that preceded the Global Financial Crisis.
The indicator does not call the exact day or month. It tells us that expected returns for the broad US market over the next several years are meaningfully challenged from these levels. When that is combined with a 5%+ risk-free rate, the risk-reward of owning passive US beta becomes far less attractive.
We are not bearish. We are disciplined about the price we pay for risk.
Our Response: Long Alpha. Reduce Beta.
Raising Cash
Cash is no longer idle. With yields above 5%, patience is being rewarded and liquidity has real value.
Reducing US Exposure
Price of US equity risk has become less attractive. Discipline around valuation, risk, and forward returns.
Rotating Internationally
Capital redeployed selectively. Cheaper, earlier in the earnings cycle, tilted toward sectors this regime rewards.
Leaning Into Alpha
Where we believe there is differentiated edge, we are concentrating capital.
The Alpha Sleeve
Gold
The Trust Trade
Gold is no longer trading only on real rates. It is trading on trust. When the bond market questions the Fed's ability to control inflation, gold becomes one of the cleanest hedges available. Central bank accumulation continues to look structural, not tactical.
Oil
The Structural Setup
For years, the energy industry was discouraged from investing in new supply. That bill is now coming due. The Middle East premium is the catalyst, but the larger story is underinvestment, limited spare capacity, and a global economy that still runs on oil.
Real Assets
The HALO Thesis
Heavy assets, low obsolescence, high replacement cost, and scarcity value. Pipelines, infrastructure, and real assets where new supply is difficult or impossible to build. These are the types of assets that can matter when discount rates rise and commodity inputs are bid.
International Equities
The Valuation Trade
The US is the most expensive major market in the world heading into the most hostile rate environment in two decades. International indices trade at meaningful discounts and are more exposed to financials, industrials, and materials. The ECB and BoE are still cutting while the Fed remains stuck. This is where US equity weight is being redeployed.
Gold protects against the failure to control inflation. Oil profits from the cause of it. Together, they do not depend on equity multiples.
Now Is the Time to Look
Across every account you hold, ask the question:
- Where do you have concentrated US large-cap or index exposure built up during the AI rally?
- Are you holding long-duration bonds that have not been re-priced for this regime?
- Is cash sitting idle in low-yielding accounts when it could be earning 5% or more?
- Are you underweight real assets, gold, and energy at exactly the wrong moment?
- Are there tax-loss opportunities that can fund a portfolio reset?
If any of these apply, let's talk. The setup is too important to leave on autopilot.
MLD Wealth Management Suite 2400, 520 3rd Avenue SW, Calgary, AB T2P 0R3T: 403.691.7821 | mywealthmanagement.ca
The information contained herein is for informational purposes only and is not intended as investment advice or a recommendation to buy or sell any security. The views expressed are those of MLD Wealth Management as of the date of publication and are subject to change without notice. Past performance is not indicative of future results. Investing involves risk, including possible loss of principal. Member of the Canadian Investor Protection Fund and the Canadian Investment Regulatory Organization.