The jobs market is deteriorating with layoffs, worsening payroll net revisions, and the Fed bracing for a bad number, indicating a recession may already be underway.
A K-shaped recovery is evident, with the top 10% thriving while the lower 90% struggle, potentially evolving into an eye-shaped recovery with a small group at the top doing well.
The housing market is recessionary, with starts and permits down 20% year-over-year, and new homes selling at a $80,000 discount to existing homes when adjusted for builder perks.
The Atlanta Fed estimates a 2.1% recession for this quarter, while the St. Louis Fed projects positive 1.7%, suggesting a likely recession despite the Fed’s increasing estimate of economic health.
The US housing market faces a chronic shortage of affordable housing, with existing homes overpriced at $435,000 instead of $335,000, and new home sales suffering from shockingly low prices.
The Canadian housing market, with its bigger price bubble and shorter mortgage durations (average 5 years), serves as a preview for the US, showing accelerating softening and increasing refinancing needs.
The baby boomer generation is overwhelming the housing market, with almost half of all home purchases occurring among boomers, making it difficult for younger generations to afford high-end homes.
Long-term rates are rising despite the Fed’s easing, with the 10-year yield at 4.25% and the 30-year yield around 5%, indicating a disturbing scenario in the US and other developed countries.
The Euro dollar market, a critical component of global liquidity with $11 trillion in uninsured, unsecured deposits, could face stress during a crisis, potentially leading to a dollar shortage and market collapse.
The commodity complex has a promising outlook due to supply deficits and growing demand, with silver and gold miners being particularly attractive investments.
The energy sector is undervalued and underinvested despite being essential for the AI revolution, with Brazil being a favorite due to its 33% year-to-date return in dollars.
Natural gas is undervalued at $2 globally, with electricity demand skyrocketing due to data centers and AI, making it a cheap and attractive investment opportunity.
Gold’s breakout above $3,450 signals a strong bullish trend with potential upside targets of $3,750-$3,950, indicating significant momentum in the precious metals sector.
The gold-to-stock market ratio bouncing above the 200-day moving average with an upward slope suggests capital flow from stocks to gold, a positive indicator for the precious metals market.
Silver’s weakening against gold and sideways movement after hitting its $41 target implies potential for retracement unless gold continues its ascent to $3,750-$3,950.
Gold stocks breaking out of a 12-year base against the 60/40 portfolio indicates a significant shift of capital from traditional assets to gold equities.
The 20-day exponential moving average of new 52-week highs in GDX at 41% surpasses all peaks in the last decade, signaling an extremely overbought condition in gold stocks.
Bullish hammer candles in GDX, GDXJ, and SILJ following sharp upward moves suggest market fatigue and potential for a near-term correction in the gold stock sector.
Bond vigilantes have evolved into gold vigilantes, with gold now closely tied to global debt markets due to factors like liquidity stress and falling reserve repo balances.
The Japanese government bond market has reached an all-time high, potentially indicating heavy-handed intervention to control yields and currency, which could lead to a temporary dip in gold prices.
Gold is increasingly viewed as a cash equivalent by investors pulling out of bonds due to market fragility, making it a macro discretionary trade.
Macro discretionary bond vigilantes are buying gold on dips, especially when Japanese government actions lower bond yields, anticipating increased buying after Fed decisions.
Higher Japanese government bond yields stem from lack of liquidity and inflation, with money printing seen as a solution to cap yields and weaken currency.
Some traders are shorting Japanese bonds and buying gold simultaneously, a potentially risky strategy based on the belief that gold prices will significantly increase within a year.
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