Mid-Week Maco (5/7/2025)

Mid-Week Macro.

The Fed meeting was today, and as expected, rates were left unchanged. Everything in the near term hinges on Trump’s tariffs and Fed policies. I think it is obvious what is going to happen. Trump is not going to back down on using tariffs to accomplish his economic goals. What is coming (very soon) is shock #2 to Wall St. They were shocked on liberation day (August 2nd), and they will soon be shocked again when they learn that Trump is not going to back down.

Trump wants to use tariffs to accomplish several goals: 1) Improve the budget deficit. 2) Improve the trade deficit. 3) Strengthen the UST bond market. 4) Strengthen the middle class. 5) Avoid the decline of America.

Sadly, he is too late to fix these problems. Wall St thinks he is bluffing and is more concerned about kicking the can and getting the economy and stock market growing. They are going to get shock #2 when they find out he isn’t.

Gold is currently trading over $3400 (spot). Gold is telling us what is happening. Gold is telling us that the US is in big trouble. The S&P 500 is at 5600 with a PE of 21 and requires double-digit earnings the rest of the year to maintain that level. They are begging. There is no chance of that outcome. We are heading back to retest 4800. A recession is incoming, and it is going to be ugly and prolonged.

Wall St (and most economists) think Powell will not let that happen. But there is nothing he can do to stop it. The combination of tariffs, Triffin’s dilemma, and the Von Mises bubble is too much to overcome. We gambled with MMT, and now it’s going to bite us. Got Gold?