Mid-Week Macro (12/18/2024

Mid-Week Macro

1) As expected, the stock market has begun to become volatile. Today, the S&P was down 3% after FOMC meeting and Chairman Powell gave some hawkish comments. This volatility is inevitable with the stock market overvalued and the economy slowing. I expect at least a 10% correction (which we didn’t have in 2024) at some point, and perhaps a crash of more than 20%. It’s amazing that investors are so bullish with so much uncertainty. The dollar (DXY) is at 107.9, which is not good for anyone. It puts pressure on the bond market, pushing the 10-Yr to 4.5% today. Plus, the strong dollar exports inflation. How does Trump get the dollar down, which will be one of his priorities?

2) Gold and silver, and the miners, all got whacked. Gold was almost $2800 last week and closed at $2605 (spot). Silver could not hold $30, and closed at $29.66. The HUI is at 284. With the strong dollar and potentially weaker stock market, gold/silver/miners are all under pressure. I’m bullish gold and think it is heading to $4K. However, before it gets there, I expect a correction down to around $2350, when the stock market corrects/crashes. The cycle low for the HUI will be around 250. That isn’t a crash, but might feel like one if you bought above 300.

3) High long-term rates (10-Yr, 20-Yr, and 30-Yr) and likely to remain high, putting pressure on the US economy. The Fed essentially said it was pausing their rate cut cycle today. This will tend to put a floor under long-term rates and the dollar. Those who expected the stock market to continue to run higher will likely be disappointed. Trump now has his hands full trying to fix this economic mess. I think it will steadily deteriorate into a hard landing. Got Popcorn?