Mid-Week Macro (4/9/2025)
Wow, what a stunning week. The stock market and bond market have been making massive moves. The S&P traded from a low of 4802 on Monday to a high of 5486 today, which is a 14% swing from low to high. Today, the S&P had a low of 4843 and closed at 5480. The S&P was up 9.5% today. A remarkable day.
The huge reversal from low to high occurred when Trump blinked and paused the tariffs for 90 days (except for China). Trump could handle the stock market dropping, but he could not handle last night's rise in interest rates for long-dated bonds. The 10-year bond closed at sub-4 % last Friday. Last night it traded at 4.5%. A stunning move higher. The 30-year bond was also much higher.
Watching yields rip higher last night, I had a feeling that either Trump or Powell would blink today, and it was Trump who threw in the towel. The question is, why were interest rates ripping higher last night? I have two theories. First, it could have been the Chinese dumping their Treasury bonds as retaliation. However, the more likely reason is that Citadel and its massive basis trade was blowing up.
Ken Griffin, the CEO of Citadel, is probably the only person with enough stroke who could get Trump to change his mind on tariffs. Just yesterday, Trump said he had no plans to pause the tariffs, and I don't think he did. However, Griffin likely told him his company (which is the largest market maker on Wall St) would be bankrupt if he didn't. My guess is that Griffin told him that he needed 3 months to fix his problem and that if Trump didn't help him, the stock market was going to implode.
There are so many ticking bombs in our economy. The basis trade is only one of them. High-yield junk bonds are also blowing up. Yields are up to 8.5%, and they have to roll over more than $800B in loans in 2025 (many of those will go BK). Commercial real estate is blowing up, with many loans going BK. The US Treasury has to roll over about $5T in bonds that are maturing between now and the first of the year. Yikes!
It gets worse! The economy is slowing; the consumer is broke; and, the employment situation is deteriorating. CEOs know this and are starting to make plans to lay off their workforce and curtail capital spending. Batten down the hatches. Katey, bar the door!
The rebound in stocks today was likely a dead cat bounce. Trump bought some time, but he didn't prevent the onset of a recession. Plus, he will release those tariffs in July. The bad news for us gold/silver mining stock investors is that Trump delayed the fear trade, which is needed for silver and the HUI to break out. I think we have to get back below 5000 on the S&P to ignite the fear trade. So, we are back in wait mode.
The good news is that gold had a God candle today and was up $100 (that's never happened before). Spot gold opened at $2982 and closed at $3082. In after-hours trading, it's up to $3093, and silver is at $30.93. It's spooky that an exact 100 GSR has held the last couple of days, although I think it is a good omen that this is a top in the GSR. Gold was up 3.3% today, and silver was up 3.8%. Gold is telling us that the economic mess isn't going away, and gold is going higher as a result. With the S&P up 9.5% today (a sign of a strong economy), gold should have gone down.
In conclusion, all that matters is the S&P 500. We need it to go back below 5000 and ignite the fear trade. Then silver and the HUI can break out. Gold showed us today that it is ready to decouple from the stock market. We can be confident that will be the outcome. I doubt gold will see $2700 in 2025, but it might see $2800. The gold floor isn't that far away, so the gold miners are looking better and better.