Mid-Week Macro (4/2/2025)
Mid-Week Macro
1) Trump unleashed his tariffs today (I didn't think he was bluffing). This is a unilateral attempt by Trump to generate revenue to lower the budget deficit and to reduce pressure on interest rates and the bond market. It is also a historic shift away from the globalism of the past 40+ years that began during the Reagan Administration in the 1980s. This is a rebuke of globalism and free trade. It is also highly dangerous and likely to create a recession.
2) I have been saying that the most important data point to watch is the S&P 500. It closed today at 5670, which is down 8% from its ATH. The critical level is 5500, which is below 10%, a correction level. It will enter a bear market (down 20%) at 5000. With these tariffs, I doubt that 5500 will hold for the rest of the week. Once we get to 5300 or 5200, it will become a line in the sand. I don't know where we cross the Rubicon with no chance of a rebound, but I think it will be somewhere in that area. So, the next few weeks will be interesting. We could be witnessing the end of the 15-year bull market on Wall St.
3) Gold has been leading in 2025, reaching one ATH after another. I think we hit another one today for both the spot price and futures price. It closed at $3133 spot today, and got close to $3200 tonight on the futures. Why is gold ripping higher? It's a perfect storm: tariffs will cause inflation; tariffs create more uncertainty with global trade; tariffs create more uncertainty for a US recession; Basel III is creating demand from central banks; the US bond market is becoming fragile from high interest rates; the leverage in the US financial system creates uncertainty; the BRICs countries are buying gold to move away from US Treasuries; and MOMO (gold price momentum) is creating FOMO.
4) What about the gold/silver miners? The HUI closed at 361 today. It's trying to break out of a 10+ year channel, but can't seem to get going. Silver also continues to lag, closing today below $34. I continue to believe (and I have been right) that the HUI won't get moving until the fear trade arrives. I think we are close, but we should expect one more correction before the HUI breaks out. I continue to expect gold to correct 5% to 10% when the S&P finally breaks down. Many think gold will just keep ripping higher, but that is not my expectation in the near term. Let's see where gold is at 5200 or 5000 S&P. At that time, we should have a good indication if gold will strongly decouple and head higher.