David Rosenberg

Not once in the post-WWII era, outside of 2022 when the American consumer was swimming in a $2 trillion pool of fiscal stimulus checks, has the Fed managed to avert a recession when they tightened policy into an energy price shock. The 2s/10s curve is only 30 basis points away from inverting. Keep an eye on it. Nobody, including the Warsh-led Fed, believes a recession is even a remote possibility. A big surprise is coming their way. As we saw with the Internet boom in the early 2000s, AI is not bigger than the business cycle.

Post-Fed, the 2-year T-note yield has popped +9 basis points while the long bond has come down -3 basis points. The bond market’s way of telling the Fed that its hawkish tone will prove to be a policy blunder. Flatter yield curves = weaker growth and a nail driven into the risk-on trade.

The Fed is saying it has no intention of cutting rates. But it’s not about any inflation concern. It’s because the central bank has already been easing through the back door with its renewed balance sheet expansion – increasing at a 10% annual rate over the past four weeks! This liquidity bulge has added rocket fuel to the end-of-war market euphoria. Never mind Donald Trump – Jay Powell still has your back!

“You know, we don't - we don't take things off the table, but it isn't anybody's base case right now - anybody's base case - that the next move will be a rate hike.” Straight from Jay Powell’s mouth in the last post-meeting press scrum. Do we fade the Chairman or do we fade the scrubbed-down FOMC minutes that were released today?

The Dow may have just pierced the 50,000 milestone - I don’t seem to recall this much excitement in the media when the Nikkei accomplished this feat this last October - but the real story is how foreign markets are crushing it and leaving the U.S. major averages in the dust. Indeed, year-to-date, the Euro Stoxx 50 index is up nearly +5%, even the FTSE 100 has advanced more than +4%, and wide swaths of Asia have already returned double-digits – Korea +26%, Japan +15%, Taiwan +14%, and Thailand +12%, to name a few. It says something when the “laggards” like Hong Kong, Singapore, and China are “only” up around +6%. That puts the +1.7% uptick in the S&P 500 into perspective – not to mention that these other geographies carry with them firming currencies.

We’re seeing a tale of two markets. Gold remains in a secular bull market fueled by sustained central-bank buying, but is increasingly overbought in the near term. US equities, meanwhile, are in bubble territory, with a negative equity risk premium. History suggests this setup rarely ends well. Watch my full interview from last week: https://t.co/sstYavz9r6

I said in my daily this morning that perhaps the best trade out there in this tumultuous environment would be to pair a long position in gold with a short position in silver. That barbell would have generated a net positive return of +14% in one day. A whole lot better than being a Bitcoin owner (-10% today alone), and Walter Murphy just told me that the break of Bitcoin below $74,000 crossed his ‘line in the sand’ for initial support - which means the next leg down could end up being just as severe as the first one. Maybe better to add Bitcoin to silver in that barbell with the gold position.

Markets are starting to feel euphoric again, and that’s rarely a good sign. There was a lot of excitement in the room last week at the VRIC conference, the frenzied energy felt like a tech conference back in 1999. I sat down with @ITMTrading and shared what parabolic moves in gold and silver are really signaling, and why successful investing is about capturing the middle of the cycle, not chasing peaks. Watch my full interview here: https://t.co/DFce9b9hqa

I can only guffaw when I hear how the Citigroup Economic Surprise Index has magically risen to a fifteen-month high coming off a year when nonfarm payrolls fell short of the consensus forecast 75% of the time and by a cumulative total of nearly -600k! I guess the job market doesn’t matter to many people any longer now that we have an AI spending boom bumping against endless supersized fiscal deficits to keep the economy afloat.

The silver-to-gold ratio first broke above its long-term average back in mid-December – when the silver price outright was trading just above $60/oz -- after a five-year stint of trading at a steep discount. The ratio today is nearly 20% above the historical norm. While still nowhere near prior peaks, this mean reversion process has done its job already in correcting two extremes. I had previously been bullish on the silver trade but for the here-and-now would refrain from chasing this thing and joining the crowded trade at these super-elevated levels. Not to mention that the white metal at this point looks so asymptotic that it resembles a dotcom stock in 1999.