Mid-Week Macro (6/11/2025)
June continues to be a strong month for the S&P 500 (6022), gold ($3368), silver ($36.25), and the HUI (418). Several analysts believe that gold and silver will continue trending higher in the near term. I'm not so sure. I'm extremely bearish the stock market, which I think is way overbought and is going to crash (over 20%) soon. I don't know if this crash will occur rapidly or steadily over several months, but I don't see a scenario where we don't go back and retest 4800 this year. If we get to January and do not retest 4800, then I will be wrong.
I do not believe the stock market can go up much further. The best-case scenario is that we get a mild correction and then remain in a tight trading range. But even if this happens, I expect that trading range to eventually break down and fail. My thesis is simple: the economy is slowing, and the Trump tariffs will be the pin that pops the everything bubble. The US economy has been a Potemkin economy relying on fiscal dominance (large Federal Government spending), to print fake GDP. It is hanging on by a thread, and the data is misleading. Reality is that Triffin's Dilemma is playing out, and the economy is failing. This will become apparent soon.
The Trump tariffs are actually a desperate attempt to kick the can, but it will fail. The US Treasury has to borrow $9T in 2025, and most of that will be at short maturities that will come right back in the next few years. The amount of money the US has to borrow is staggering. We have reached the endgame. The US is insolvent, but everyone is pretending that we can print our way out. Once the recession begins, the Fed and the US Treasury will be holding a losing hand. The more they print/borrow, the worse it will get. Anyone who buys US bonds with 5-year maturities or longer is foolish and will lose money.
First, the stock market will crash, and then the US government bond market will become fragile. That is the future, and it will not be long now before that outcome occurs. That was always the outcome. Trump knows it and is trying to use tariffs to push that outcome further into the future. Unfortunately, he is out of time, and America's economy is out of time. We had a good run. Now it ends. What comes next? No one is thinking about that yet, but you will soon.