Behind the Stock Market Rally: The Dollar Is No Longer the Dollar It Once Was

After a stellar 2010s, the bond market's performance in the 2020s has been disappointing. Technical analyst Francis Hunt believes the plunge since 2020 marks the end of a 40-year debt bull market.

In his view, sovereign states and large institutions are increasingly being forced to preserve capital in hard assets rather than chase paper returns.

The Debt Cycle Is Reversing

For Hunt, the global financial system has moved past the era of loose money that began in the early 1980s. In a recent interview, he noted that since the bond market capitulation in 2020, yields have entered a structural reversal characterized by "lower highs and lower lows" in bond prices, along with an eventual nominal devaluation of these instruments themselves.

Moreover, he believes this shift changes how investors should interpret nominal gains in stocks and other risk assets. The apparent growth in index levels is largely due to the denominator effect of the weakened purchasing power of fiat currency.

"This is not the same dollar anymore," he commented. In this environment, nominal wealth expands while real wealth erodes. For Hunt, this dynamic makes gold a pressure release valve.

"A debt crisis is a turbocharger for gold," he stated, as capital begins to prioritize capital preservation over returns. Investors are no longer asking what can compound fastest but what cannot be printed, diluted, or frozen.

The "Hotel California" Liquidity Mechanism

In Hunt's view, the Treasury market is a one-way architecture—easy to enter, but restricted to exit. "You can check out any time you like, but you can never leave," he quoted, invoking the timeless lyric.

Instead of outright liquidation, creditors are being pushed toward swap facilities, repurchase facilities, and borrowing against the collateral they already hold. In Hunt's view, this creates an artificial asymmetry: buyers are welcome, sellers are restricted.

He cited the UK's liability-driven investing crisis in 2022, the pressures on CalSTRS, and the recent strain on Gulf states following the Iran war. In each case, the system's response has been to restrict liquidation and provide liquidity against pledged assets.

Japan IS the Stress Point

However, Japan may be the most significant test case. Japan holds over $1.1 trillion in U.S. government bonds, which is large enough to exert influence but constrained enough to be boxed in.

Japanese holders, he says, are not freely selling but are instead being offered limited borrowing power secured against their bonds—"we are allowed $60 billion right now," he notes, pointing to the gap between this capability and the size of the holdings.

He warns that a deeper rupture could force a sharp unwinding of the carry trade. This would drag on capital within global risk assets and push Treasury yields higher—something the U.S. cannot afford.

Such a scenario would upend standard textbook logic, where higher yields attract sustained capital inflows. Hunt says that under sovereign stress, yields look less like returns and more like risk premiums.

Gold Priced in REAL Denominators

At the core of Hunt's chart work is measuring stocks in terms of gold rather than dollars. In this framework, he says the U.S. stock market peaked in 1999, formed a secondary high in 2021, and now looks vulnerable to a longer-term reset.

SPY divided by the gold, 3-month chart, Source; TradingView

In Hunt's view, the technical line in the sand is around 0.15. A move through this neckline would signal a potentially rapid acceleration of gold relative to the SPDR S&P 500 ETF Trust.

He suggests the S&P 500 and Nasdaq averages may still drift higher near-term, but that's because the base currency is being debased simultaneously. In contrast, GOLD captures the erosion of confidence in paper claims.

"We are entering a more convex period," he said, and, quoting Ernest Hemingway, he noted that bankruptcy occurs "gradually, then suddenly."