Hi,

Here is the 5th edition of Mulder Strategies with the latest reading on my proprietary recession indicator and a detailed liquidity update. I want to thank you for subscribing as I do not take it for granted. It's a day later than usual but that is because I wanted to add specific remarks about current geopolitical events.

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 June 8, 2026, the proprietary recession indicator stands at 25%. This remains firmly in low-risk territory and continues to be supportive for bullish investors in the near term. However, as I have noted in previous updates, there is still underlying weakness in the economy that is not yet fully visible in official government data. That is why I never rely on the headline indicator number alone. I also track the monthly data revisions and the broader implications behind the numbers. You will always see any meaningful shifts reflected right here in these monthly reports. Right now inflation is potentially resurging and that causes the hands of the FED to remain tight.

Inflation has started to tick higher again, driven primarily by the sharp rise in oil prices. Oil is one of the most important commodities in the economy. When its price increases, the cost of transportation rises immediately, which then flows through to businesses and ultimately to consumers in the form of higher prices across many goods and services.Looking ahead, June’s inflation print is expected to come in around 4.2%, up from 3.8% last month. 

The official number will be released on June 10th. With both PPI and PCE also showing upward pressure, this release is likely to be a disappointment for markets.For now, the increase remains concentrated in energy and has not yet broadened significantly into core measures. Still, it serves as a reminder of how quickly geopolitical and commodity developments can influence the inflation picture and, by extension, the policy outlook.

I will keep a close eye on the June 10th data and any reaction in bond yields and risk assets. This development adds a layer of near-term caution but does not yet change the broader constructive backdrop for markets.

There was broad consensus earlier this year that the Fed would deliver meaningful rate cuts in 2026. That outlook has changed dramatically since the Iran conflict began. Rising inflation and ongoing layoffs have left the central bank with very little room to maneuver. Even the newly nominated Fed Chair Kevin Warsh is expected to take a patient approach and wait for clearer data before considering any further easing. Markets are now starting to speculate about the risk of runaway inflation, with some even pricing in the possibility of higher rates down the road. 

In my view, any rate hikes that do materialize would likely be very short-lived. They would risk triggering a sharp sell-off in already stressed markets, which would quickly force policy back toward easing once the damage was done. For the FOMC meeting in 9 days, the current consensus is that the Fed will hold rates steady at 3.75%.

Employment rose in the past month, helped in part by seasonal factors tied to the World Cup. This has helped ease some of the recent concerns around AI-driven job displacement.Unemployment has remained steady at 4.3% after breaking out of its lower range. While this increase looks more seasonal than structural, it still delivers a short-term bullish tailwind for markets right now.The stable jobs picture also gives the Fed more room to maneuver. With the labor market holding up reasonably well, there is no immediate pressure to provide extra support.Overall, this is a constructive development in the near term. It adds a layer of stability to the economic backdrop and supports the view that the soft patch we saw late last year was temporary rather than the start of a deeper slowdown.

I remained overall bullish heading into mid-year. That said, now that the SPX has reached my upper target zone of 7620, it is time to adopt a more defensive stance. This shift is not driven by the recession indicator, which has actually improved but by the combination of stretched valuations, extended technicals, and the very rapid pace of the recent advance.

After such a strong and fast move higher, I no longer see enough attractive risk/reward straight ahead. For now, a more defensive approach makes sense. I am comfortable taking some profits and rotating into other sectors or opportunities that have been left behind and now offer better value. The secular bull cycle is still intact, but prudence and selectivity are the order of the day as we move through the middle of the year into the later part of 2026.

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
Liquidity conditions remain neutral for this month. The U.S. Dollar has strengthened toward 100 and is likely heading to 103 in the near term (risk-off bias), while banking system stress stays low and domestic liquidity is holding in a balanced range. Higher energy prices have not yet impacted banks meaningfully.

The DXY has bounced sharply from deeply oversold levels and is now hovering near 100. As I noted in recent updates, I continue to expect the dollar to trade in the 100–103 range in the coming weeks. So far, however, it has not yet picked a clear direction and remains below the upper trendline. We are still stuck in a choppy, range-bound zone between the two green lines. This lack of conviction keeps the dollar in a neutral stance for now, neither strongly supportive nor clearly negative for risk assets.

The domestic liquidity picture has not changed in the past month. It remains neutral and range bound for now.

The TGA has remained steady going into Q2 as declared by the FEd themselves. There are ample reserves to support the market if needed and for now it remains ranging.

Cash assets of both small and large domestic banks remain healthy and are slightly moving up as financial conditions improved.

Not much has changed since last month as liquidity remains neutral overall. No clear implications are given from liquidity this time around.

Geopolitics are a HOT topic in the markets right now that causes a lot of volatility. This has not always been the case but it remains a characteristic in a late stage bull cycle. I wanted to focus first on the current Ukraine-Russia war, as this is often overshadowed by the active war in Iran.

Ukraine’s deepening strikes inside Russia, enabled by US targeting intelligence and European weapons/drones (including overflight permissions from Baltic states), are increasingly irritating Moscow. 

Russia believes the West is prolonging the war mainly to gather battlefield data for future conflicts, despite knowing Ukraine’s chances of victory are low. This has created growing domestic pressure on Putin to escalate. Influential advisor Sergey Karaganov and many other Russian strategists now openly advocate hitting back directly at involved European countries — especially the Baltic states and Germany — and have even floated the possible use of nuclear weapons if Europe fails to take Russia seriously.

Recent signs of escalation include:

A dangerous trend toward direct Russia vs Europe confrontation is emerging. Diplomacy is virtually nonexistent. We hope this assessment proves wrong, but the momentum for escalation is clearly building and should be something investors watch carefully.

Despite growing concerns about a potential new geopolitical flare-up that could act as a peak signal for equities, the overall outlook around the Iran conflict and the Strait of Hormuz has continued to ease in recent weeks. 

The US-Israel vs. Iran war that began on February 28, 2026, is currently in a precarious pause following the US-brokered ceasefire in early April. Tensions remain elevated over Israeli operations in Lebanon, access to the Strait of Hormuz, and Iran’s nuclear program.

On June 7, Hezbollah rocket fire into northern Israel triggered Israeli airstrikes on Hezbollah targets in Beirut’s southern suburbs. Iran responded with ballistic missiles aimed at an Israeli airbase, all of which were successfully intercepted with no reported casualties. Both sides quickly stepped back and issued warnings of stronger retaliation if provoked again.

President Trump has been actively mediating and applying pressure on all parties. In recent calls with Israeli Prime Minister Benjamin Netanyahu, he warned that continued strikes could leave Israel “on your own very soon,” stating bluntly that Israel would have “no choice” but to accept any US-negotiated deal with Iran because “I call the shots.” Trump expressed optimism that a final agreement could be reached in the next “two to three days,” potentially reopening the Strait of Hormuz and placing limits on Iran’s nuclear activities.

At home, the administration faces growing domestic pressure. The Senate has advanced a War Powers Resolution with some Republican support, and the House recently passed a similar measure aimed at limiting further US military involvement without congressional approval. This adds urgency for the White House to wind down hostilities. While mutual interest in avoiding a full-scale resumption exists, the ceasefire remains extremely fragile. New incidents could unravel it quickly amid the ongoing brinkmanship and proxy dynamics in Lebanon.

Markets continue to react to every headline on energy prices and risk assets. For now, the situation has de-escalated enough to support the constructive backdrop we have seen since April, but the risks are still very much alive. I continue to monitor developments closely as this story evolves rapidly and hope this latest update clearly shows the active themes in geopolitics that influence the markets.

Continuation into the 8000 range for the S&P 500 remains plausible, even after we rejected the 7620 level last week. That 7620 zone was my original annual target for 2026, which I expected to be reached around mid-year.I still see a realistic chance we could overshoot current highs around 7600. Geopolitical tailwinds combined with euphoric sentiment could easily drive one final leg higher. That said, I am not adding aggressively at these levels. The asymmetric upside has narrowed considerably, and the risk/reward is no longer as compelling given how far and how fast the market has run. Instead, I am actively looking for undervalued sectors that are currently out of favor, along with additional opportunities in emerging markets. I am also keeping some cash on the sidelines to deploy on any meaningful pullback. 

I continue to hold the cryptocurrency positions I bought in 2020. Right now, crypto remains one of the more unfavorable areas in the broader market. Overall the stance has become more selective and defensive for equities. The secular bull cycle is intact though, we just need to be smarter about where we allocate capital from here.

My overall expectation after we see our current peak would be that we see another bigger sized correction driven by overleverage in the system, historic high valuations and cyclicals that point to 2026 as a peak year. Whether now or later in 2026 (Max. timeline around November 2026) I do see a big possibility for another +/-20% correction to take hold after we reached our peak on equities. 

I launched this Passive Model Portfolio on January 1st, 2026. It is up over 7.7% 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