5/26/25
I
am off on a two and half week vacation in Europe. Be back on 6/16. Enjoy your
Memorial Day weekend.
The Market
Technical
Not a great week for the S&P. Between the
latest Trump tariff tantrum and the disappointedly, fiscally irresponsible Big,
Beautiful Bill, neither stock nor bond investors were very happy. The index
ended the week having broken the uptrend off its April 7th low and
hanging precariously above its 100 and 200 DMAs. The only thing to do now is
see whether the S&P will regain that uptrend or reset those two DMAs. If
the latter, then the next visible support level is the 50 DMA (~5584). Follow
through.
As I noted above, the long bond didn’t fare any
better than the S&P. It pushed through (1) the lower boundary of its very short
term trading range---resetting it to a downtrend and (2) the lower boundary of
its intermediate term downtrend. That leaves TLT in downtrends across all time frames
and below all DMAs. If the bond vigilantes are getting serious about refusing to
go along with these spendthrift morons in the ruling class, expect more
downside.
https://www.zerohedge.com/the-market-ear/end-era-8-incredible-charts-bond-markets
Watch the Japanese long bond.
https://www.zerohedge.com/the-market-ear/want-know-where-markets-go-next-watch-japans-long-bond
GLD performed pretty much as expected given the
tariff and budget news---bouncing off its 50 DMA and rallying nicely on the week.
Near term, I would expect it to continue to react inversely with bond and stock
markets (i.e., rally off a further deterioration in fiscal policy). It
remains well within a very short term uptrend and in uptrends across all other
time frames as well as above all DMAs. ……stay with what works.
Unsurprisingly, the dollar followed the same
playbook as the rest of the indices---which is to say it got hammered. So for the
moment, the assumption remains that it is heading lower.
Friday in the charts.
Friday in the technical stats.
https://www.barchart.com/stocks/momentum
https://www.barchart.com/stocks/sectors/sectors-heat-map
Fundamental
Headlines
The Economy
The US stats last week were mixed as were the
primary indicators (one plus, one minus). Ditto, the international numbers. So,
no real reason here to contemplate altering my forecast---a ‘muddle through’ economy.
I noted last week that the caveat to this outlook was
that we can’t dismiss entirely the risk of another nuclear
blast coming out of the White House that would again raise the odds of
recession.
And, of course, we got one on Friday when Trump made
a new set of threats against Apple and the EU for not bending to his will. If
this follows what has become the standard script, the parties will have a conversation,
kiss and make up and this will be another of those ‘much to do about nothing’
incidents.
That said, the almost continuous state of
uncertainty fostered by Trump’s trade policy is likely having an impact on businesses
willingness to make long term investment decisions which almost certainly has a
dampening effect on economic growth---hence, recession remains a risk.
To make matters worse/more uncertain, the bond vigilantes
apparently woke up to the fact that fiscal profligacy reigns supreme both here
and abroad---apparently triggered by the house’s passage of the Big, Beautiful
Bill. The Japanese and US bond market were especially hard hit.
What is most concerning is prospect that the
markets have finally reached the end of their patience with the budgetary malpractice
of the ruling class and are about to impose the kind of discipline (refusal to
buy) that will make for a very rough ride in the securities markets.
And.
https://www.capitalspectator.com/inflation-anxiety-and-the-big-beautiful-bill/
I am not making that my forecast---yet. But I am pushing
the yellow warning light. Unfortunately, if this is a false alarm and it doesn’t
lead to a change in fiscal policy, the impact will be all that more painful
when it finally does occur.
Bottom line. Short term, the odds of recession, in
my opinion, remain low. Longer term, the inflation outlook is more visible and getting
worse.
US
International
Other
The death of the penny (speaking of
inflation---which I wish I weren’t).
https://politicalcalculations.blogspot.com/2025/05/the-day-penny-died.html
A deep dive into the housing market.
https://bonddad.blogspot.com/2025/05/new-home-sales-make-3-year-high-as.html
Fiscal Policy
Regime
uncertainty versus market uncertainty.
https://thedailyeconomy.org/article/regime-uncertainty-and-market-uncertainty/
Tariffs
The
negative impact of tariffs on earnings.
https://www.apolloacademy.com/the-negative-impact-of-tariffs-on-earnings/
And now for some good news. Trump endorses
Nippon Steel/US Steel deal.
https://www.zerohedge.com/markets/trump-endorses-us-steel-nippon-deal
Investing
Big oil just went big AI.
The anchoring problem and how to solve it.
News on Stocks in Our Portfolios
What I am reading today
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