As the Dust Settles
We have our new president and we have unified branches of government. We have a rejection of what took place over the last 4 years. I won’t get into my own personal politics, mainly because as you may already have gathered, I do not see the two party system as currently constructed, as a good thing (political nihilism, if you will). For me, it’s one flavor of bad vs. the other. One flavor of agenda prepared to further impoverish the nation from the perspective of a not-yet-realized or acknowledged (slow-moving) debt crisis vs. the other.
I will say that some of the “woke” stuff that cropped up had me shaking my head over the last 4 years. As in… “did these people learn nothing from the first Trump insurgency?” As in… instead of moderating on liberal democrat ideals, they leaned in harder, which I think was a slap in the face to average Americans out there trying to make ends meet.
On that note, the inflation problems that the average American is still dealing with (as “sticky” supply chains continue to gouge) was created under Donald Trump. It was created by the Federal Reserve in its balls out inflationary policy that we called at the time, during Q1, 2020. I am not going to go searching back there for quotes, but feel free to do so if you wish. Our theme was to not be bearish because the Fed was pulling out the inflationary stops to rescue asset markets and bail out asset owners once again. Only this time, they finally blew a gasket with the 2022 bond market reaction to the inflation problem.
So with all the other important issues at hand (for me, the sieve at the border is a primary one), it is striking that the Harris campaign was so unsophisticated economically that it could not even summon the intellect to identify the source of inflation in its own promotion and defense against accusations that the Biden administration is responsible for the inflation problems that middle Americans are dealing with.
Inflation was manufactured by the Fed under Trump (debt monetization and money printing, as we called in real time) and it was exacerbated by the Biden admin (vigorous debt spending). Debt spending occurred under Trump #1 and it is set to occur under Trump #2. Some say even more aggressively than had the democrats held power. Why again do I have no faith in either side of the aisle? Because it is a late-stage, hubris-addled society with public and political vast majorities that have no clue how the financial system actually works… in my fatalistic view.
Trump projects confidence, even though he is clueless about, or worse, an agent of inflation. He won. Harris was once asked about inflation and she pulled a deer-in-the-headlights routine, babbling incoherently in response. I was stunned. Yes, confidence wins every time. With Trump you pretty much know what you are getting; a battering ram. With Harris, what were we getting? Anyone really know?
The bottom line is that Trump is not a solution. Trump is a new set of challenges and strategies we will adopt. Trump is also opportunity, as would have been Harris.
Futures
Speaking of the debt, the 10yr Treasury bond is down over 1% this morning, which means that 10yr yields are up hard. The question now is whether the move is a knee-jerk (USD is also smashing upward) that will break the Continuum’s bull flag upward for good, or just a reaction that the machines will reverse in due time? Stay tuned.
The stock market is having probably the least surprising reaction to a Trump election, with the ES (SPX futures) up 2%. Gold is down hard, as are the miners. Also not surprising, although anecdotally I think that the gold bug community is probably overwhelmingly conservative and in the context of this election, pro-Trump. But that’s life in GoldbugVille. I don’t come easy.
The markets are obviously cheering at least a few things…
- Corporate tax cuts to come (to be funded by, you guessed it, new debt).
- A lack of extreme capital gains taxes that were likely under Harris (yup, more debt).
- Deregulation, freeing businesses from meddling government to the degree a Harris victory would have likely meant.
- Trump as well known battering ram, as noted above, vs. Harris as ???????? Clarity.
- Etc.
ES is ticking a new all-time high. Backing out the fact that this knee-jerk is coming on the heels of a very emotional macro moment (subject to volatility), if we take the technicals at face value the move – if it holds up – keeps the SPX on its target for 6180 off of the pattern we’ve been tracking.
Here is SPX at yesterday’s close, for reference.
On Plan
“To or through the election”.
We are now through the election. Last week’s rough going to end the week reset sentiment on a short-term basis and this week so far, the market is taking advantage of that. These are the little sentiment “micro-blips”, as I call them. It’s how an over-bullish, at-risk market can keep on going indefinitely.
So now, speaking personally, I have a decision to make about whether or not to keep my (thankfully unleveraged) shorts. I am still focused on the bear view ahead, but “ahead” is not exactly a good timer, is it? I’ll try to see how this week shakes out and maybe hold, maybe get rid of the shorts. As mentioned many times over the years, I have a psychological vulnerability to being short a market that is running on pure emotion and greed.
But if the correlation of gold and the precious metals to the broad rally is to continue (a legitimate question), somebody is off-sides this morning. Either gold is telling the stock market that it is wrong to be bullish, the stock market is telling gold that it is wrong to be bearish… or they are disconnecting.
Gold is on a rather dramatic pullback to the first support shelf. There is more potential downside to the uptrending SMA 50 or even the 50% Fib retrace level and support in the 2530 (+/-) area.
Silver is getting dope hammered to support and the SMA 50, with more support lower at 30.
I am going to hold my shorts on the gold miners as a hedge and evaluate day-to-day, week-to-week. What is happening is obviously an unwinding of the high risk in gold (as noted in recent NFTRH) as a risk-off haven, now that clarity and a big bull joy fest have come to the stock market.
More to come as the week/s unfold. We finally have the election over with and things remain on track, especially with the state of long-term yields and the SPX target. Gold is getting croaked, but that too makes sense (and frankly, was needed, given the short-term risk readings). But this is all in the knee-jerk time frame. It will require a balanced and adjustable viewpoint going forward.
