Mid-Week Macro (3/5/2025)

Mid-Week Macro

1) The S&P has been volatile the past 7 days, with several sell-offs followed by rallies. It closed today at 5842 and began the day under 5800. Can it rally back to an ATH, or are we heading lower? Trump's tariffs are clearly creating headwinds. He placed 25% tariffs on Canada and Mexico on Tuesday, and last night he said that tariffs are needed to save the soul of America. Those are strong words. He also said that he would add reciprocal tariffs on all countries on April 2nd, and that he wanted to balance the budget. He clearly wants to use tariffs to raise a lot of revenue. Can the economy and stock market withstand a trade war? Stay tuned.

2) This week, the dollar is down from 107 to 104, and the 10-Year rate was down to 4.1%, closing today at 4.3%. Both are probably heading lower. The lower dollar pushed gold up to $2916, silver up to $32.56, and the HUI up to 326. Let's see how they close on Friday. I still expect all three to go much lower if the S&P crashes to sub 5000 (my expectation). However, I am bullish the second half of the year, with gold and silver making big moves after a fear trade ignites.

3) As I have repeatedly said this year, the only number that matters is the S&P, and it has been extremely volatile the past 7 days. I think this is a bad omen, along with sticky inflation, sticky high interest rates, weak consumer spending, weak jobs, weak PMIs, weak housing, weak autos, and the loss of leadership from the MAG-7. I think the recession could begin in Q1. The Atlanta Fed currently has GDP growth at negative 2%. Trump is playing with fire with his aggressive tariff policy.