Holding Cash as the Market Prices a Hike, Not a Cut

This Week in Context

The big shift this week was not a headline. It was a number. The May employment report, released by the Bureau of Labor Statistics (BLS) on June 5, showed the economy added 172,000 jobs against a consensus near 80,000, with the unemployment rate steady at 4.3% and the prior two months revised up by a combined 93,000. A labor market that strong does not need lower interest rates.

So the market did something it has not done all year. It moved from pricing Federal Reserve rate cuts to pricing a possible rate hike before year-end. Treasury yields jumped and the dollar firmed. Equities sold off on Friday, then clawed back part of the move on Monday as Iran signaled a step back from the latest round of fighting.

Our book was built for exactly this. Forty percent in short-dated Treasury bills, a quarter in hard money (gold, silver, Bitcoin), the rest in equities. We are holding all of it.

Macro Landscape

The 10-year Treasury yield rose to about 4.55%, its highest in two weeks, after the jobs print. Futures markets now lean toward at least one rate hike in 2026, a sharp reversal from the two cuts priced at the start of the year. The June 16-17 Federal Open Market Committee (FOMC) meeting is still expected to hold, but the conversation has changed from when the Fed eases to whether it has to tighten.

This is the cash sleeve earning its keep. Short-dated Treasury bills pay close to 4% with no duration risk, which means they do not lose value when long-term yields rise. Long-duration government bonds, which do, remain an avoid. We own none.

The other open question is the Lisa Cook case at the Supreme Court, with a ruling expected by the end of June on whether a president can remove a Federal Reserve Governor for cause. A decision that weakens Federal Reserve independence would steepen the yield curve and lift gold. We do not need a view on the law to size the hedge. Gold and short-dated cash both express it.

Sector Spotlight: The Jobs Report and the Rate Path

A strong labor market is good news for company earnings and bad news for the rate-cut trade at the same time. That tension is the whole story right now. The same data that supports record equity prices also takes away the rate relief those prices have been leaning on.

the reversal

Start the year pricing two rate cuts. Get a 172,000 jobs print instead. End the week pricing a hike.

The honest counter-argument is that a hot jobs market is not a recession, and recessions, not rate scares, are what end bull markets. That is the case the equity tape is making, and it is why we hold 35% in stocks rather than zero. But it is also why we do not add here. You do not chase an index into a tightening scare when 40% of the book is already paid to wait.

Crypto Corner

Bitcoin had the loudest week. Spot fell through $60,000 over the weekend for the first time since 2024, then steadied near $63,500 by Monday. The break of the $76,000 line we have flagged for weeks is now well established, and tighter global liquidity plus a firmer dollar are not the backdrop in which Bitcoin bottoms easily.

The long-horizon case has not changed: persistent fiscal deficits, central-bank credibility under stress, negative real wage growth. The near-term tape says momentum has not turned. Both can be true at different time horizons. Our position is to hold the 7% allocation, not add at the break, and wait for spot to stabilize and reclaim $76,000 before scaling in. Buying a drop because it is cheaper is not a plan. A clean trend reversal is.

Looking Ahead

Three things on the calendar.

First, the May Consumer Price Index (CPI) print in mid-June. A hot number on top of a hot jobs report would harden the rate-hike case and pressure both gold and long equities further.

Second, the FOMC on June 16-17. A hold is near-certain, but the language and any dissents will tell us how the new committee reads an economy that refuses to slow.

Third, the Lisa Cook ruling. The outcome moves the long end of the curve and gold more than it moves anything at the front, which is one more reason the cash and hard-money sleeves are sized the way they are.

The book is unchanged: 27% VOO, 8% VWO, 13% GLD, 5% SLV, 7% BTC, 40% BIL. We are holding, and this week the data made the case for us.