The Trump trade expectation of higher interest rates, lower dollar, and higher stocks is being challenged as the dollar falls and stocks rally simultaneously, indicating a potential shift in market dynamics.
The correlation between the dollar and stocks has flipped since late 2021, with recent movements puzzling analysts and suggesting the Trump trade may not be as straightforward as previously thought.
The week of Thanksgiving 2022 will be crucial, with the release of GDP and PCE price index data, which are vital for the Federal Reserve’s decisions on inflation and interest rates.
The PCE price index is one of the most important indicators for future monetary policy decisions, making the upcoming data release critical for understanding the Fed’s next steps.
The RSI and composite index were overbought and diverging when the dollar and stocks peaked on Friday, suggesting the recent drop may be a short-term correction rather than a reversal.
The Department of Government Efficiency aims to eliminate unconstitutional regulations, using Supreme Court decisions to justify reducing bureaucracy and potentially canceling deficits or paying down debt.
Studies estimate regulations add $10,000 to a car, $330,000 to hiring a manufacturing worker, and $50,000 per year for small manufacturers, driving production to China and hindering competition.
Trump can instantly pause enforcement of regulations overstepping Congressional authority, effectively nullifying thousands of rules without formal recision, potentially boosting the economy significantly.
The Supreme Court has ruled that 50% of federal regulations are unauthorized by Congress, providing legal justification for the proposed regulatory overhaul.
The Department of Government Efficiency’s approach is described as targeting the “jugular of the Death Star”, referencing Elon Musk and Vivek Ramaswami’s op-ed in the Wall Street Journal.
The Fed’s “higher for longer” interest rate policy may be unsustainable due to $36 trillion US debt, potentially leading to financial instability and forcing quantitative easing.
Rising debt service costs and a strained corporate sector are putting pressure on the economy, with banks being $500 billion underwater on their treasury holdings.
Gold’s 25% rise in 2024 signals economic trouble due to increased interest rates, suggesting the Fed may need to restart quantitative easing soon.
BRICS nations’ moves in global finance could further strengthen gold’s position as a cornerstone of the world economy.
The Fed’s projected four rate cuts in 2024 may be overestimated, as inflation remains high with super core over 4%, twice the Fed’s target.
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