Mid-Week Macro (11/6/2024)

Mid-Week Macro

1) The election was last night and Trump won. Wall Street expected him to win but it wasn’t all priced in. The S&P closed at an ATH 5920, up 2.4% on the day. What happens next? I expect the stock market to go higher. How high? It's too early to know. We are in blue sky territory. 6200 or 6300 on the S&P seems to be in play, but we are all guessing where this tops out. I think it would have crashed if Harris won, but Trump means that taxes are not going up and regulations are going down. So, that creates bullishness on Wall St. 

2) I doubt the stock market will correct this month, so it could be boring for a few weeks, but December and January could be interesting. Will the market remain at these lofty ATH levels until Trump is inaugurated in late January (usually January 20th)? My guess is no, but it could happen. 

3) Gold got whacked today (down $76) because the dollar (DXY) was up to 105 and in anticipation of Trump reviving the economy and strengthening the economy and bond market. I think this correction in gold (if it goes lower) will be short-lived. Trump and the Fed will have a hard time creating a soft landing or strengthening the bond market. Serious problems remain in the economy and bond market. When will the honeymoon with Trump optimism end? A week, a month, or several months?

4) The bottom line is this: I remain bullish gold and expect it to trend to $4000 over the next 24-36 months. The reason why is because the US Government deficit and bond market are a mess that can't be fixed. These problems will continue to manifest as higher gold prices. My floor remains $2350 to $2400. I expect to reach this level once the stock market finally peaks and rolls over, thereby ending the 15-year bull market.

5) Many think gold will not drop to my target area, and they might be correct. Gold has been resilient and wants to go higher. It’s not farfetched to see this melt-up continue, with the S&P trending higher and gold trending higher for several weeks or several months. We are currently in no-mans land, and no one knows what is going to happen in the near term. But I think the odds favor a coming recession, which will be preceded by a stock market crash. I don’t think that can be avoided. Trump or no Trump.