Mid-Week Macro (1/8/20250

Mid-Week Macro

1) The S&P closed today at 5918. This is strong enough to keep Wall St happy. However, the 10-Yr bond is at 4.67% and the DXY is at 108.8. Those are levels that are making Wall St a wee bit nervous. Those two data points seem to be correlated, although I’m not sure which one is the driver. If they go higher, then stocks have severe headwinds. Trump gave a press conference yesterday and said rates are too high. Thus, he wants Powell to lower them, but Powell wants to fight inflation, which has been sticky. Lower rates would be good for the economy in the near term, but could ignite inflation and cause serious problems. We have reached the Rubicon. What will the Fed do? And what will be the fallout?

2) Powell has been able to fight inflation and not cause a recession. But now comes the tricky part. How does he land the plane and get a soft landing? Can he tame inflation? Can he keep the economy growing? Will stagflation arise? One thing is clear, the Fed is juggling a lot of balls in the air with an economy that is barely breathing. Some will say the economy is strong, but that’s hopium. Everywhere you look, you see signs of a recession. Full-time jobs have been falling. Credit card delinquencies have been rising. Retail store closings have been raging. Banks, autos, and housing are all struggling. Consumers are broke and can’t pay their bills. We have a Potemkin economy that is being hidden by using massive budget deficits and foreign investments in our bubble stock market.

3) Gold closed today at $2658 (spot). That’s pretty strong, considering the dollar has been flying. Silver and the miners continue to lag. This has been my expectation until the bull market on Wall St ends. Gold will follow the stock market, and silver and the miners will lag. So we wait. We might see a short-term rally in gold/silver/miners, but it will likely be a false breakout. I doubt you will see new cycle highs for the silver ($34.72) or the HUI (358) until the bull market on Wall St ends. Perhaps in Q2.