Dear Trader,

Yesterday I told you the 10-year is heading to three percent or five percent, and I gave you two scorecards for rates moving lower. One where falling rates are a gift. One where they're a warning.

Today you get the scorecards for rates moving higher. I'm putting these macro flashcards together for myself. It's part of my Reboot. When I managed macro portfolios, this is the work I did before anything moved. Scenario mapping. Cross-asset flows. I want to share them with you because the process is more valuable than any single forecast. Wall Street gives you a number. I'm giving you a framework.

There are two distinct roads to five percent. The road you're on determines whether you're buying or running. Just like the two scenarios for rates down, I took the research from Goldman, Bridgewater, Gundlach, and BCA. Ignored their forecasts and mapped out what their own analysis actually describes. How rates, stocks, the dollar, and gold behave in each one.

Scenario 3: Growth Runs Hot. Rates up, stocks up, dollar up, gold stalls. Risk On.

This is the good version of five percent. The economy is legitimately strong. AI capex is boosting GDP. Fiscal stimulus lands. Earnings grow because demand is real, not because multiples are expanding. The Fed is on hold because there's nothing to fix.

Goldman's 2.6 percent growth forecast, the most bullish of any major house, is the base case here. Bridgewater estimates AI capex alone adds 140 basis points to growth. Morgan Stanley highlights three trillion dollars in data center spending with less than 20 percent deployed. The spending is accelerating.

You want the sectors leading the charge. Financials (XLF) because banks print money when the curve steepens (long-term rates rising faster than short-term) and loan demand is healthy. Technology (XLK) because AI capex is being validated by revenue. Industrials (XLI) because somebody has to build the data centers and the grids. Energy (XLE) because strong growth means strong demand and reshoring adds a structural bid.

It's the bull case with teeth. That should make you both excited and careful. If the market starts flashing signals from the next scenario, you need to move fast.

Scenario 4: Sell America. Rates up, stocks down, dollar DOWN, gold up. Crisis.

This is the nightmare. We saw this on Liberation Day. The S&P dropped 12 percent, the dollar fell six percent, and long-end yields jumped 40 basis points in the same week. It resurfaced during the Greenland standoff in January. It keeps coming back. And it's the one that separates "rates are rising" from "confidence is collapsing."

Rates here don't rise because growth is strong. They rise because nobody wants to hold US debt. The term premium (extra yield demanded for the risk of holding long-term debt) explodes. A divided fed can’t send a clear signal. Japanese institutions start repatriating capital because they can earn two percent at home for the first time in a generation. Gundlach's de-dollarization thesis goes from fringe to front page.

The tell? Stocks, bonds, and the dollar all fall at the same time. In every other scenario, at least one of those acts as a counterbalance. When all three decline together, the market isn't repricing an asset. It's repricing the entire country.

You want SPDR Gold Shares (GLD) because there's no counterparty risk when the counterparty is the problem. If you have to own equities, iShares MSCI EAFE ETF (EFA) works because capital fleeing the US needs somewhere to land. Broad commodities via iShares S&P GSCI Commodity-Indexed Trust (GSG) because physical assets hold value when paper assets are being questioned.

Everything else gets sold. US large-cap tech, small caps, and homebuilders get hit hardest because they're the most crowded, most leveraged, and most domestically exposed. They don't bounce. Straight down.

Nobody at Goldman is going to publish "Sell America" as a scenario. It’s a small probability, a tail risk. But their own research teams are telling you to buy gold as a hedge against "institutional risks resurfacing" and "fed independence risks." They're describing this world without naming it. Know how to identify this when it’s happening.

Your Scorecards: All Four

You now have four scenarios. Two for rates lower, two for rates higher. Each with a cross-asset fingerprint and a sector playbook. Print em out. Keep them next to your screen. The edge isn’t in predicting what outcome will occur. It’s in being prepared for when they do.

Next time I'm going to show you what to do with these when the market actually starts moving. Having a plan is step one. Knowing how to read what the market is telling you? That's where it pays off.

Tim