Gold and macro environment, page-1030

Every crisis is different. We have had the everything bubble - stock prices at historical highs by any measure, crypto bubble, housing prices in the US are at ATH's and seen by many to be in a bubble and spreads on prime and sub-prime credit at historic lows (ie a bubble).

The US economy has been slowing down eg The Altana Fed projected GDP growth for the 1st quarter 2025 is minus 3.7% and minus 1.4% excluding imports of gold. Consumer confidence very low, etc.

Then along comes DOGE cutting government spending which will have a negative impact on growth. Then immigration is stopping which is inflationary.

Then we get the huge increase in tariffs the highest since 1909 - they are at the worst end of a possible range and have had a huge impact like a black swan event - hence the stock market reaction, big increase in spreads on prime and sub-prime are blowing out and crypto is down. The huge tariffs will see a bug disruption to supply chains (and we know what happens when that occurs eg COVID sent inflation much higher), inflation will increase in the USA , there will likely be shortage of goods, profits will be down, and then add tariffs from other countries on US goods.

Tax cuts are mostly to extend the 2017 cuts ie no impact on incomes. Yes there are other tax cuts to corporate rates and some additional ones for richer individuals.

All these changes plus a weak economy is a recipe for a very bad recession in the US and world wide including Australia.

As we speak US futures are down - 2.5% for Dow, 3.22% for S&P 500 and 4% for Nasdaq - this will push the Nasdaq well into bear territory (ie 26% fall), S&P 500 down 20.1% ie bear territory and Dow down 16% heading to a bear market.

There will likely be more margin calls on Monday in the US given the size of the fall in markets on Friday's close to 6% for S&P 500 and Nasdaq which will prompt a further decline in the US stock market tonight and if the falls are 3-4% or more more margin calls will be on the cards Tuesday - the only thing that will stop the falls will be if institutional long funds start buying but will they? Then we have over half the market cap in the US being in passive ETFs and if they see lots of redemptions from these ETFs the market will fall a lot further.

There a re possible contagion impacts as well which we are yet to see - these include a hedge fund or more going belly up or banks getting into trouble. If one or both were to happen this downturn could get very ugly. The big US banks have a huge exposure to hedge funds ie $US2tr in loans to them.

We are at the very start of the fall out not just from tariffs but also from the everything bubble bursting, a weak economy (not just US). Then add the huge amount of uncertainty in the market and the economy.

I expect a recession this year in the US and in most countries but the severity of the recession is still uncertain - if Trump's tariffs are not wound back a lot I expect the recession will be quite bad.