Hello, Here is the 3th edition of Mulder Strategies with the latest reading on my proprietary recession indicator and a detailed liquidity update. I also give you our monthly update of our Passive portfolio which is up 9% since January. I want to thank you for subscribing as I do not take it for granted.

Every month we review our proprietary recession indicator, which combines key economic signals into a single, easy-to-read probability score. Think of it as a dashboard light for the U.S. economy.

Quick Summary
As of May 1st 2026, the indicator stands at 41%. This remains in “low-risk” territory and is still supportive for bullish investors in the near term.

There are many fundamental signs that the economy is deteriorating as I reported last month. While many of these developments are not yet directly reflected in my recession indicator, I continue to monitor them closely and will talk about these headwinds once I see significant risk in markets.

Our latest reading stands at 41%. That is only a modest increase from last month’s 33% and remains firmly in low-risk territory. This level continues to signal no elevated recession risk at present and is supportive for bullish investors in the near term. The improvement in the overall backdrop is clear: the acute uncertainty surrounding the Iran situation that weighed on markets last month has de-escalated steadily. Markets have confirmed this shift by climbing higher. I have responded by scaling back into stocks I view as undervalued, resulting in modestly higher overall market exposure than I carried last month. The data and price action together reinforce the message that the near-term path remains constructive. 

The first estimate for Q1 2026 GDP was released in April and showed 2% annualized growth. That is a solid, healthy number that points to an economy continuing to expand at a respectable pace. As always with the initial release, this figure will be revised twice in the coming months as more complete data flows in. We will not have the final picture until the third and final revision later this summer. 

Still, a clearly positive GDP print is one of the most straightforward signals of underlying economic health. To put the number in context, GDP ran very strong in the summer of 2025 at over 4%, before slowing sharply to around 0.5% in Q4. The latest Q1 reading therefore marks a meaningful step in the right direction. 

A negative GDP number is often the hallmark of recessionary conditions and would have raised clear red flags. Instead, we have confirmation that the economy avoided a stall and is showing renewed momentum.

If the upcoming revisions hold around this level or improve further, it would reinforce the constructive backdrop for risk assets and help sustain the upward trend in equities we have seen since the April lows. 

Consumer sentiment is trending toward new lows, driven primarily by ongoing global energy issues stemming from the Iran conflict. Higher prices at the pump and broader cost-of-living pressures are clearly weighing on household confidence. The impact is not limited to the United States. In Asia, for example, several countries heavily reliant on Middle Eastern oil supplies have already begun implementing energy mitigation measures and, in some cases, outright rationing. These disruptions are rippling through global supply chains and are already affecting GDP growth in multiple regions. Importantly, many of these effects are still lagging. 

The full economic backlash from elevated energy costs will likely become more visible only in the coming months as the data catches up. With consumer spending accounting for roughly 70% of U.S. GDP, this weakening in sentiment and purchasing power is something worth watching closely. For now, the picture remains mixed: wealthier households continue to benefit from rising asset prices, while lower- and middle-income families are feeling the squeeze more acutely. This “K-shaped” dynamic we have seen before is reasserting itself.

Companies are well into their Q1 2026 earnings season. Roughly 60% of the S&P 500 have now reported and the results show clear strength: earnings have beaten expectations by a very healthy 20% on average (for now). That is an impressive surprise margin and points to a robust season so far. 

We will have the full picture next month, once the remaining companies report, but the early data already suggests this has been one of the stronger quarters in recent memory. What stands out even more is the trend in forward guidance. Companies continue to raise their outlooks, reflecting confidence in the months ahead. At the same time, investor and analyst expectations have also continued to climb higher. Consistently delivering upside surprises, especially at this magnitude, becomes increasingly difficult as the bar keeps rising.

For now, the combination of strong beats and upward revisions to guidance is clearly supportive for markets. It reinforces the message that corporate America is navigating the current environment effectively and that underlying business momentum remains solid. In next months update I will provide the final earnings for Q1 of 2026.

Inflation ticked higher this month, coming in at 3.2%. The increase is primarily driven by elevated energy prices linked to the ongoing fallout from the Iran conflict. Higher oil costs are feeding directly into headline inflation and adding pressure on everyday living expenses. While this is a noticeable step up, the level remains moderate by historical standards and well below the peaks of 2022–2023. Still, it underscores how geopolitical events can quickly translate into price pressures. Later this month we will receive the next official CPI print. Markets will be watching two things closely: whether the rise stays concentrated in energy, or whether it begins to broaden into core measures. Any sustained pickup in core inflation would reinforce the Fed’s already cautious stance on rate cuts. For now, this development adds another layer of near-term caution to the liquidity and policy outlook, as the current Fed will likely keep rates stable considering both the uncertainty in both the Iran war and the implications on inflation being one of their two mandates for price stability.

I remain overall bullish heading into mid-year and I deem more upside the most probable scenario, still. At the same time, I continue to follow the principle of “strong opinions, loosely held.” We will keep monitoring the indicators and the underlying signals closely each month, any meaningful shift in the data will be reflected immediately in future updates.

Liquidity conditions are a key driver of market direction. When liquidity is abundant, risk assets tend to rise. When it tightens, markets often become more volatile or correct.

Quick Summary
The U.S. Dollar has weakened toward 98, which is generally positive for risk-on assets and equities. However, tax season in the United States has pushed the TGA higher over the past month, temporarily draining liquidity from the system and acting as a modest headwind for risk assets. Higher energy prices have not yet shown up meaningfully on bank balance sheets. That said, the consumer weakness I highlighted last month remains a key risk, if energy costs stay elevated, it could eventually create additional pressure on households and, by extension, on banks.

For now, the net effect keeps the liquidity picture balanced rather than clearly bullish or bearish. We will continue to watch both the TGA runoff in May and any signs of consumer strain as the data develops.

When we look at the Dollar Index (DXY), a reliable gauge of risk-on versus risk-off sentiment and overall liquidity conditions, the picture has shifted in recent weeks.

After rising to test the first major resistance level near 100, the index has pulled back and broken down from that zone. Our earlier expectation was that we could see a deeper move higher toward the stronger monthly resistance around 103. Instead, we have seen the opposite: a clear breakdown below the recent range.

We are now watching two clear possibilities. The index could break below the current lows and head toward the 95 area, or it could rebound and reclaim higher ground. 

With rate cuts largely off the table because of persistent inflation pressures, I do not expect significant further downside in the near term. More likely, we will see choppy, range-bound trading as the market digests the shifting liquidity backdrop. We will continue to monitor the DXY closely, any decisive move above 103 or below 95 would signal a more meaningful shift in risk appetite and market direction but for now we remain neutral on the Dollar.

Domestic liquidity has deteriorated since April. After holding near the upper end of its recent range for several weeks, it has now broken lower and reached fresh lows for the year. This shift is clearly negative for risk-on assets in the near term. That said, the move appears to be driven primarily by the Treasury General Account (TGA), which has increased its balance meaningfully over the past month. While this is a technical factor rather than a broad tightening across the banking system, it still reduces the amount of cash available in the system for now. 

We will continue to monitor the TGA closely, any reversal lower in the TGA account would help restore liquidity and support a more constructive backdrop for markets.

Both small and large domestic banks have ample reserves in the system in April and are increasing their reserves as of late 2025. This is a good signal of bank sector health.

Treasury General Account (TGA)

As I noted earlier, the Treasury General Account has added meaningfully to its balance sheet in April and pushed to new highs. This is the main driver behind the recent deterioration in domestic liquidity. The Fed had signaled it would keep the TGA relatively steady through Q1 2026. We have seen a clear increase over the past month as the Treasury built up cash. 

In its February 2026 Quarterly Refunding Announcement, the Treasury explicitly forecasted that the TGA could peak around $1,025 billion (± $50 billion) by late April before beginning to decline in May. The buildup was driven by expected strong April tax inflows, and the Treasury had planned to reduce short-dated T-bill issuance to help manage the temporary cash surplus. 

Tax season turned out even stronger than anticipated. As a result, the TGA overshot the high end of the forecast range before the planned deployment of capital back into the markets begins in May. This technical cash buildup is temporary and should start to reverse over the coming weeks, which would help replenish domestic liquidity. We will be watching the TGA balance closely in the May data: a meaningful decline would further support overall liquidity and is a bullish signal for Risk on assets.

Reverse Repo Facility (RRP)

The Reverse Repo Facility remains largely depleted. The balance sheet for the RRP is not expected to refill in the way we saw over the past couple of years unless there is a major policy shift that once again injects substantial excess reserves into the system. This is fully consistent with the post-QT environment, where reserves are now managed much more tightly by the Fed. 

With the RRP staying flat at these low levels for the foreseeable future, there is simply very little liquidity being added or withdrawn through this channel.Given the lack of meaningful movement, I will only report on the RRP again when there are material changes or developments worth highlighting. For now, the facility continues to sit in the background with negligible impact on overall market liquidity. We will keep a close eye on any signals from the Fed that could change this picture.

Global Liquidity Picture

As you may have noticed in the markets, liquidity remains abundant overall. This is clearly visible in the push to new all-time highs in global liquidity measures. Despite the headlines and concerns around the Iran situation, markets continued to move higher through April. 

Fresh liquidity has been injected back into the system, providing meaningful support for the recovery we have seen.This global backdrop helps offset some of the recent technical pressure we have observed in domestic liquidity. While the TGA-driven tightening created a temporary headwind, the broader global picture stays constructive and risk-supportive for now. We will keep a close eye on how these two forces interact in the weeks ahead. For the time being, the combination of strong global liquidity and the ongoing secular bull cycle continues to favor a generally bullish stance, even as we stay vigilant to any shifts on the domestic side.

The U.S. liquidity environment is currently stress-free and neutral, neither clearly bullish nor bearish. Higher energy prices stemming from the Iran conflict have not yet shown up meaningfully in bank balance sheets or liquidity metrics. That said, we are already seeing signs of consumer strain, which could eventually pressure banks if energy costs stay elevated for an extended period. This is a very dangerous trend we need to actively monitor.

In my first newsletter I outlined two plausible scenarios for the S&P 500 and how price action might unfold from the April lows:

‘‘Scenario A – Ceasefire holds

A diplomatic resolution is reached within the next few weeks. Oil prices normalize below $90. In this case, the recent bottom in the S&P 500 could prove to be the low point, potentially leading to a V-shaped recovery similar to what we saw in April 2025.’’

It is now clear that Scenario A has played out. We have seen exactly the de-escalation and recovery I described, and the index is now trading near the annual target zone I had outlined as 7300–7660.

From here I can see a further push toward 8000 before any meaningful downside materializes, but the path will depend heavily on how the current sector rotation develops and how geopolitical risks evolve. Geopolitics remains the dominant near-term driver for markets. The recent advance has been powered by strong gains in semiconductors and a solid recovery in the Mag 7 names, supported by another impressive earnings season.

Despite this constructive price action and the strong fundamental backdrop, I continue to hold my original view: the market should perform well into mid-year, but I expect increasing headwinds to emerge in the second half of 2026. I will keep a close eye on both the technical levels and the evolving geopolitical picture. For now, the base case remains constructive heading into the middle of the year, consistent with the secular bull cycle we are still operating within.

As equities continue to attract inflows and rotation from other sectors, cryptocurrencies are also starting to regain momentum.For Bitcoin to shift into a clearly more bullish phase, it still needs to break decisively through the current resistance zone — the red zone I have highlighted in recent updates. A clean breakout above that level could trigger an impulsive move toward the 100,000–110,000 zone.If we fail to see sustained momentum and support here, I expect a reversal back into the recent trading range.Should Bitcoin manage to gather real steam, Ethereum and the broader altcoin market could see a very strong bounce. Bitcoin dominance has not yet declined meaningfully in this cycle, which means any shift in leadership would likely provide significant tailwinds for the rest of the crypto space.For now, I remain fully seated in the positions I already own and am watching the key technical levels closely. I will update you as soon as we get a decisive move in either direction.

I launched this Passive Model Portfolio on January 1st, 2026. It is up over 9% as of May 2026.

I will not add any new capital to it. Instead, I’m running it as a transparent, real-world example of a well-balanced portfolio across sectors and regions. Starting capital: €10,000. I will report any changes here so you can track performance over time. Because this is a passive portfolio, I plan to keep adjustments to a minimum and only make significant changes when I believe the secular (long-term) cycle is shifting.

Changes made since last issue:

None