Mid-Week Macro (9/3/2025)

Mid-Week Macro

The stock market remains strong, with the S&P 500 closing today at 6448, near an all-time high. Does the economy support a strong stock market? My guess is no. The stock market appears to be significantly overvalued, trading at 3x sales and 2x GDP. How much longer can it remain at these lofty levels? My guess is weeks or perhaps a few months, but not much more than that. Powell pivoted to cutting rates at Jackson Hole in August because he is concerned about a slowing economy. It won’t be long now before the recession arrives.

Gold hit an ATH today, with spot closing at $3545. Silver came along for the ride, closing at a 14-year cycle high at $40.91 (spot). Why is gold and silver so strong? I heard a Wall Street analyst today say that gold is a terrible indicator, and that he prefers to focus on earnings. Wall Street has it wrong. Gold is the canary. Gold is screaming that there is a problem. What is the problem? US debt, and specifically the US debt bubble, which includes government debt, corporate debt, and household debt. But all of that debt relies on one thing: the US Treasury Bond market. The fragility of that bond market is why gold is ripping higher.

Gold is the leader in 2025. Gold is the bull market, and not the stock market. Both will correct at some point, but good luck keeping gold down. Gold will go higher after the correction, but the stock market will not. That’s the story right now. If you can see it, then you aren’t paying attention. Gold is trending to $5000, and the S&P 500 is trending to 4000. That is what gold is telling us, and soon it will be apparent to everyone.