Dear Partners and Prospective Investors,
As we move deeper into December, the market environment continues to clarify rather than calm. The period from December 10th through today, December 17th—the first full stretch of trading following last week’s Federal Reserve rate cut—has reinforced a critical reality: volatility is no longer episodic, it is structural. Some assets are trending with conviction. Others are deteriorating beneath the surface. And many are simply masking fragility with leverage.
This is precisely the type of environment where discipline—not prediction—defines outcomes.
Markets After the Fed: Reality Sets In
Following the Fed’s 25-basis-point rate cut, markets initially responded with optimism. That response was short-lived. Equity indices struggled to sustain gains, intraday ranges widened, and market breadth continued to weaken. Leadership narrowed further, and dispersion across asset classes increased. Bond markets reflected uncertainty rather than relief. Treasury yields moved sharply in both directions as investors attempted to reconcile mixed economic data, sticky inflation, and a Federal Reserve that clearly signaled caution about the pace of future easing. Volatility in rates remained elevated, underscoring how sensitive markets have become to even incremental policy adjustments. Currencies reacted more decisively. The U.S. dollar softened following the Fed’s decision, and that weakness began to ripple through foreign exchange and commodity markets—particularly precious metals.
Metals Lead — Silver Stands Apart
Since last week, metals have continued to outperform, and silver has clearly distinguished itself as the leader. Post-Fed dollar pressure, rising volatility, and strong technical structure combined to push silver higher with consistency and follow-through. The Nehemiah Fund remains fully positioned and fully scaled into silver, reflecting maximum conviction under system rules. This is not a short-term trade. It is a response to sustained trend behavior supported by momentum, structure, and historical precedent. Gold and copper have remained supportive, reinforcing the broader metals complex, but silver continues to lead in both strength and behavior. Historically, this relationship is well established. Periods following monetary easing—particularly when accompanied by dollar weakness—have often produced extended advances in precious metals. A clear example occurred in 2012, when a declining U.S. dollar coincided with a powerful multi-month rally in both gold and silver. Today’s environment shares many of those characteristics.
Discipline in Action: Exiting Natural Gas
Equally important this week was what Nehemiah chose to do on the exit.
Natural Gas, which had previously been one of the strongest trends in the portfolio, reached its exit criteria. The Fund closed the position with a realized profit. This decision reflects one of the most difficult—but essential—elements of systematic investing: exiting winning trades when conditions change. Many investors struggle here. They allow emotion to override process. Nehemiah did not. The exit reinforced the Fund’s commitment to rules, risk management, and capital preservation.
Leverage Is Rising — Quietly and Broadly
While markets appear orderly on the surface, leverage across the financial system continues to build. U.S. margin debt has climbed above $1.1 trillion, placing it near all-time highs and representing an increase of roughly 40–45% year-over-year. Historically, margin debt peaks during periods of confidence—not stress—and has often preceded major market corrections, including those in 2000, 2007, and 2021. Beyond traditional margin accounts, securities-based lines of credit (SBLOCs) have expanded materially. These facilities allow investors to borrow against equity portfolios without selling assets, embedding leverage that often goes unnoticed—until asset values decline. Options markets add another layer. Short-dated and leveraged option activity remains elevated relative to long-term norms, increasing convexity and amplifying market moves when prices shift. At the institutional level, derivatives and credit instruments—including interest-rate swaps and credit default swaps—remain at historically high notional levels, tightening linkages between asset classes.
Leverage does not cause market downturns.
But it magnifies them.
MAG-7 Concentration: A Familiar Pattern
This leverage buildup coincides with extreme concentration in the MAG-7 stocks, which account for a disproportionate share of index performance, ETF exposure, and passive capital flows. History offers clear parallels: the Nifty Fifty of the 1970s, the dot-com leaders of the late 1990s, and narrow leadership phases preceding recent drawdowns. When concentration and leverage rise together, market resilience declines. Weakness in a small group of names can cascade rapidly across broader indices—especially when those indices are held through leveraged vehicles. This dynamic reinforces why Nehemiah avoids broad equity exposure when trend structure is absent and prefers diversified, non-correlated futures markets during periods of structural uncertainty.
Crypto: Structural Weakness Persists
Cryptocurrency markets remain under pressure. Bitcoin continues to trade below key trend levels following a confirmed death cross, where the 50-day moving average fell below the 200-day on both spot and futures markets. Historically, this signal has preceded prolonged periods of weakness or consolidation, as seen in 2014, 2018, and 2022. Despite last week’s Fed action, crypto structure has not improved. Liquidity remains fragile, volatility elevated, and trend quality poor.
Nehemiah remains fully out of crypto, avoiding a market where leverage, volatility, and deteriorating structure converge unfavorably.
What This Week Reinforced
The past seven days delivered a clear message:
Volatility alone does not create opportunity.
Leverage increases risk when structure weakens.
Concentration amplifies fragility.
And discipline—not prediction—defines performance.
Nehemiah’s current posture reflects that reality: fully positioned in silver, aligned with the strongest metals trends, disciplined enough to exit Natural Gas with a profit, and patient enough to stay out of markets where clarity is absent.
Looking Ahead
As year-end approaches, dispersion is increasing. Some trends are strengthening. Others are quietly failing. Environments like this rarely reward broad exposure or reactive decision-making.
They reward process.
Did You Know? Following the Federal Reserve’s December 2012 policy actions, silver went on to outperform the S&P 500 over the subsequent three months—despite widespread skepticism at the time.
A final question to consider:
In markets shaped by leverage and concentration, is your capital guided by discipline—or by comfort?
Onward,
Brian J. Visconti
The Nehemiah Fund Team