Gold prices held firm above the $2,500 level on Tuesday as market participants positioned themselves ahead of U.S. inflation data for further clues on the depth of interest rate cuts by the Federal Reserve next week.

Spot gold rose 0.3% to $2,513.07 per ounce by 9:10 a.m. ET (1310 GMT). U.S. gold futures were up 0.4% at $2,542.10.

“Gold prices are trading in an extremely tight range, waiting for the next catalyst, which are likely to be both the U.S. presidential debate tonight, followed shortly by inflation data tomorrow,” said Daniel Ghali, commodity strategist at TD Securities.

The investors will closely scan through U.S. Consumer Price Index data on Wednesday and the Producer Price Index reading on Thursday.

The CPI for August is expected to have risen by 0.2% month-over-month, unchanged from the previous month, according to a Reuters poll.

“Spot gold remains supported above the psychological $2,500 level, and any post-CPI forays below that big, round number should see bulls buying the dip once more, as they have consistently done since mid-August,” said Han Tan, chief market analyst at Exinity Group.

So far this year, gold has gained over 21%, hitting an all-time high of $2,531.60 on Aug. 20.

Lower interest rates reduce the opportunity cost of holding zero-yield bullion.

Markets are currently pricing in a 73% chance of a 25 basis point U.S. rate cut at the Fed’s Sept. 17-18 meeting, and a 27% chance of a 50 bps cut, the CME FedWatch tool showed.

Spot silver rose 0.3% to $28.43 per ounce.

Platinum gained 0.9% to $946.75 and palladium was up by 1.2% to $957.58.

The World Platinum Investment Council said the global platinum deficit in 2024 will be twice as high as previously expected due to inflows to exchange traded funds and purchases of large bars in China.

“We remain convinced that the platinum price has considerable upside potential,” Commerzbank said in a note.

See the full story HERE.

See the price performance of gold by president over the last 35 years — since George H.W. Bush.

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The US economy added fewer jobs than expected in August while the unemployment rate ticked lower.

Data from the Bureau of Labor Statistics released Friday showed the labor market added 142,000 nonfarm payroll jobs in August, fewer additions than the 165,000 expected by economists.

Meanwhile, the unemployment rate fell to 4.2%, from 4.3% in July. August job additions came in higher than the revised 89,000 added in July. Overall, revisions to the June and July labor reports showed the US economy added 86,000 fewer jobs than initially reported in those months.

Wage growth, an important measure for gauging inflation pressures, rose to 3.8% year-over-year, up from a 3.6% annual gain in July. On a monthly basis, wages increased 0.4%, higher than the 0.2% seen the month prior.

Capital Economics chief North America economist wrote in a note to clients that the August jobs report is “still consistent with an economy experiencing a soft landing rather than plummeting into recession.”

Friday’s report comes amid an ongoing debate over how severely the Fed should cut interest rates at its meeting later this month. During a late August speech, Federal Reserve Chair Jerome Powell said the cooling in the labor market has been “unmistakeable” and added that the central bank does not “seek or welcome further cooling in labor market conditions.”

Data released earlier this week indicated further signs of slowing in the job market. ADP’s National Employment Report for August showed private payrolls in the US added 99,000 jobs during the month, well below economists’ estimates for 145,000 and fewer than the 122,000 jobs added in July. The August data marked the fifth straight month payroll additions had slowed from the month prior. Meanwhile, data out Wednesday showed July ended with the lowest amount of job openings in the US labor market since January 2021.

Still, some economists argue that signs of strength within Friday’s jobs report are enough to prompt the Fed to cut interest rates by 25 basis points at its upcoming September meeting rather than making a larger 50 basis point cut.

“The overall solid gain in August payrolls, the retreat in the unemployment rate, and pop in average hourly earnings are not likely enough for Fed officials to start the rate cutting cycle with 50bps reduction on September 18,” Nationwide chief economist Kathy Bostjancic wrote in a note to clients on Friday.

But Bostjancic added that the downward revisions to payroll additions in prior months, as well as current job gains coming from a narrow group of sectors, “underscore that the labor market is losing steam rather quickly.” This, Boistjancic argues, could open the door for the Fed to cut rates by 50 basis points at one of its meetings this year.

The market agrees, with traders pricing in more than 100 basis points of cuts from the Fed this year, per Bloomberg data. As of Friday morning, markets were pricing in a 45% chance the Fed cuts rates by 50 basis points by the end of its September meeting, up from a 30% chance seen a week prior per the CME FedWatch Tool.

Gold (XAU/USD) and silver (XAG/USD) prices remained resilient on Thursday, with gold holding near $2,506 and silver trading around $28.31. Weaker-than-expected U.S. economic data boosted safe-haven demand for precious metals, as investors reconsidered the likelihood of an imminent Federal Reserve rate cut.

Gold’s Upward Momentum

Gold’s rally is driven by weak U.S. labor data and increasing expectations of a Federal Reserve rate cut. Job openings dropped to 7.673 million in July, the lowest since January 2021, with June’s figures also revised downward. Additionally, the Fed’s Beige Book highlighted reduced economic activity across multiple regions, amplifying speculation of a 50 basis-point rate cut in September.

In a recent tweet, the Minneapolis Fed noted:

“In our latest #BeigeBook recap video, @ErickGarciaLuna and @RonWirtz report where the Ninth District economy is slowing down, and also where we are seeing some brighter spots.” Watch the full report.

Lower interest rates generally enhance gold’s appeal by reducing the opportunity cost of holding non-yielding assets, further supporting the precious metal’s bullish trend.

.Geopolitical Tensions Boost Safe-Haven Demand

The escalating Israeli-Palestinian conflict is adding to gold’s appeal as a safe-haven asset. Recent violence in Gaza has fueled global uncertainty, pushing investors toward gold as a stable store of value during times of crisis.

Silver Faces Pressure Amid China’s Economic Slowdown

Unlike gold, silver faces downward pressure due to China’s economic challenges. Bank of America Global Research recently lowered China’s 2024 GDP growth forecast from 5.0% to 4.8%, signaling reduced industrial demand for silver. As one of the world’s largest silver exporters, China’s slowdown has contributed to silver’s drop to $28.27, with an intra-day low of $28.21.

However, not everyone is convinced by these marginal GDP adjustments. Nassim Nicholas Taleb tweeted:

“Some idiot in an investment bank lowered China’s forecast GDP from 5% to… 4.8%. Noise is +-2% for GDP growth in China, including accounting tricks.”

Taleb highlights the statistical insignificance of such minor revisions, suggesting that a 0.2% change may be less impactful than market reactions indicate. Nonetheless, China’s broader economic struggles still weigh on silver’s outlook, especially with reduced industrial demand potentially affecting global silver prices.

Key Data Impacting Precious Metals

Market Implications and Fed Outlook

Weaker-than-expected labor figures, particularly the ADP miss, have raised expectations of a dovish Fed stance at its next meeting. While the services sector remains strong, weaker employment data may push the Fed toward a rate cut, supporting higher gold and silver prices.

What’s Next: Nonfarm Payrolls In Highlights 

Friday will see several critical U.S. economic reports that could impact gold and silver prices:

Additionally, remarks from FOMC Members Williams and Waller could offer further clues on the Fed’s rate outlook. These events will provide key insights into the U.S. labor market and could guide future moves in precious metals prices.

Conclusion

Weaker labor data has reinforced demand for gold and silver as safe-haven assets. While the services sector shows resilience, softer employment numbers are increasing the likelihood of Fed easing, which could support higher prices for gold and silver in the near term. Traders should closely watch Friday’s NFP report, which could significantly impact market sentiment.

READ THE FULL ARTICLE HERE.

The Federal Reserve is nearing the end of an era as the central bank looks to cut interest rates for the first time in four years.

If the Fed eases monetary policy at its next meeting on Sept. 18 as expected, it will officially mark the termination of the most aggressive inflation-fighting campaign since the 1980s. Its benchmark rate is currently at 5.25% to 5.5%, a 23-year high.

The central bank’s new era of easy money is expected to last through 2025 and 2026. That shift will ripple through the US economy by making it cheaper for Americans to borrow what they need to buy houses and cars or credit card purchases.

Businesses will also have an easier time taking out loans to fund their operations. “We’re starting this rate cut cycle, it looks like, in September at a place that fed funds hasn’t been in more than 20 years,” WisdomTree head of fixed income strategy Kevin Flanagan told Yahoo Finance.

“You have a whole generation of investors who have never experienced rate cuts at these levels of interest rates.” For Fed Chair Jerome Powell, this inflection point may allow him to claim an accomplishment that eluded many of his predecessors, including his inflation-fighting idol Paul Volcker.

Powell has said how much he admires Volcker, who hiked interest rates to an eye-popping 22% in the 1980s in an effort to get inflation under control. But Volcker wasn’t able to avoid a recession as his high rates took a toll on millions of Americans and businesses.

Powell had his own Volcker moment in 2022 when he promised “pain” as the Fed took its own rate-hiking campaign into overdrive. He then experienced a banking crisis in the spring of 2023 that tested the central bank as it worked to ease panic among bank depositors across the US.

But the goal that is now within his reach is the ever-so-rare “soft landing,” in which inflation falls back to the Fed’s 2% target without forcing the US economy into a painful downturn.

Esther George, former Kansas City Fed president, said the Fed will not have finished its job until it secures its 2% inflation target.

“They may be on the golden path, but for me, [it’s] too soon to say we know the path we’re on,” George said. “The Fed’s credibility of achieving 2% is coming into better focus, but we’re not there yet.”

There is still the danger that a cooling labor market could worsen, which has the potential to drag down the US economy and force the Fed to lower rates more aggressively.

That’s the debate that will likely define the coming days as the Fed prepares for its next meeting.

Powell made clear in his last speech that the central bank is poised to begin its rate-cutting cycle, saying in Jackson Hole, Wyo., that “the time has come for policy to adjust.”

But he was silent on how big the first cut could be and whether it would definitely happen at the September meeting.

Atlanta Fed president Raphael Bostic told Yahoo Finance that September or November is “definitely in play” and that an initial 25 basis point reduction “could be the most appropriate way forward.”

Philadelphia Fed president Patrick Harker told Yahoo Finance in another interview that he expects the central bank to start with a 25 basis point cut, but he would be open to a larger cut if the labor market deteriorates suddenly.

For now, traders are betting on a small cut to start. The odds of a 25 basis point reduction in September are now at roughly 65%.

Playing catch up

The Fed’s multiyear fight against inflation began with what many consider a misstep and included plenty of ups and downs along the way.

The misstep was believing that inflation would be “transitory.” That was the belief for much of 2021 as Fed policymakers watched prices move higher due to pandemic dislocations and supply chain disruptions caused by the COVID-19 health crisis.

But when price increases spread to a broader range of goods and services, it was clear that inflation was proving to be more persistent than previously thought — especially as oil prices spiked following the start of Russia’s war in Ukraine.

In March 2022 the annual change in inflation as measured by the Consumer Price Index hit 8.5%, the highest mark in 40 years. Even excluding food and energy, the rise was still 6.5%, unacceptably high when compared with the Fed’s 2% target.

That month, the Fed decided at its policy meeting to raise rates for the first time since 2018, starting with a small quarter-percentage-point cut.

“As I looked around the table at today’s meeting, I saw a committee that’s acutely aware of the need to return the economy to price stability and determined to use our tools to do exactly that,” Powell told reporters after that meeting.

But inflation kept heating up. The annual rise in CPI accelerated to 8.6% in May and 9.1% in June.

The Fed then switched into catch-up mode, pulling the trigger on a 0.75% rate hike, the largest in more than a quarter century. It would be the first of four 0.75% hikes in a row.

As Powell became more aggressive, he sent the markets plunging with an August 2022 speech in which he warned that the Fed’s “overarching focus right now is to bring inflation back down to our 2% goal” and that this will cause “some pain to households and businesses.”

“Failure to restore price stability would mean far greater pain,” he added.

The Fed went back to quarter-point hikes in early 2023, defying some predictions that a regional banking crisis roiling the financial world at that time might stop the Fed from tightening further.

The last hike came in July 2023, settling the fed funds rate at a 22-year high of 5.25% to 5.5%. It has been at that level ever since.

‘Things look pretty good’

Investors began 2024 thinking the Fed’s inflation-fighting campaign was done and hoping for six cuts over the course of the year.

That immediately led to tension between the Fed and Wall Street. Fed officials repeatedly pushed back on those expectations, saying they needed to see more progress on inflation before they would be ready to stop raising rates.

Their caution appeared to be warranted when inflation heated back up in the first quarter, causing policymakers to revise their own predictions for multiple cuts to just one for all of 2024.

But as inflation resumed its downward crawl in the second quarter and unemployment started to tick higher, some Fed critics reemerged.

They argued the central bank had held rates too high for too long and risked upending the possibility of a soft landing.

Alan Blinder, former vice chair of the Federal Reserve and professor of economics at Princeton University, is among those who argued the Fed could have started cutting rates in July.

The Fed, he told Yahoo Finance, is a “little behind the curve.”

Blinder doesn’t think the chances for a recession have increased, noting that the economic data doesn’t look much different now than it did in July. But the job market can’t cool “too much more” without a recession, he said.

“[The unemployment rate] has been going up smoothly — a tenth of a point. You don’t want to keep that up for a year. If you do that, you’re up 1.2% points,” he added in an interview.

When asked if the labor market can cool without tipping the economy into a recession, the Atlanta Fed’s Bostic said, “It can, and we will have to see whether it does.”

But a recession, he added, “is not in my outlook.”

Former Cleveland Fed president Loretta Mester said the central bank now has a “good shot” at achieving a soft landing.

The Philadelphia Fed’s Harker agreed.

“Right now things look pretty good,” he said.

SEE FULL STORY HERE

“Do you like green eggs and ham?”

Some have called the iconic Dr. Seuss children’s book “Green Eggs and Ham” the world’s best sales manual — and its use of persistence, doggedness, and the assumptive close is not lost on the White House. It is about a relentless little fellow named Sam, (“Sam-I-Am”) who peddles green eggs and green ham to a main character who has no interest in consuming them. “I do not like them Sam-I-Am,” says the nameless protagonist.

Alas, Sam is insistent and hounds his beleaguered friend begging him to try the unappetizing combo in a variety of different places and scenarios … in a house, in a box, with a mouse, with a fox, with a car, in a tree, on a train, in the dark, in the rain, with a goat, and on a boat.

The shaggy, top-hatted narrator is adamant, however, “I do not like green eggs and ham. I do not like them anywhere!”

In the current economy, eggs and ham have become very green, indeed. Yahoo Finance states that “eggs represent morning, rebirth, and the continuity of life.” And their skyrocketing price is the embodiment of consumer “sacrifice” since they’re used in countless American meals, foods, and baked goods.[1]  

According to data from the Federal Reserve Bank of St. Louis, egg prices were about $1.35/dozen back in August of 2020. Prices rose as high as $4.82/dozen in January of this year before dropping to $3.08/dozen in July.

While the Biden-Harris administration has been quick to tout the 36% drop in egg prices from their January highs, it fails to point out that eggs are still 128% higher than they were in 2020.

The price of ham has also risen dramatically. Historical data from the Bureau of Labor Statistics indicates that ham prices are up 9.6% just since last year.[2] Likewise, the price of pork chops and bacon are up 8.3% and 3.5%, respectively since July of 2023.

Despite the administration’s attempts to justify and qualify the high-price of eggs and ham, U.S. consumers are feeling the pain.

“For the third year in a row, the percentage of Americans naming inflation or the high cost of living as the most important financial problem facing their family has reached a new high. The 41% naming the issue this year is up slightly from 35% a year ago and 32% in 2022. Before 2022, the highest percentage mentioning inflation was 18% in 2008.”[3]

The current inflation rate is 2.9%, (which is the annual inflation rate for the 12 months ending July 2024), but prices are still more than 20% higher than before the pandemic and according to BankRate “just 6% of the nearly 400 items that the Bureau of Labor Statistics tracks are cheaper today.”[4]

“Would you like them here or there?” Much like Sam-I-am, the administration continues to serve up inflation data in different forms and different contexts to convince us that prices have come down, and we should feel good about it. “No president’s had the run we’ve had in terms of creating jobs and bringing down inflation. It was 9% percent when I came to office, 9%,” Biden recently stated.

The inflation rate when Biden was inaugurated in January of 2021 was actually 1.4%. It hit 9% in June of 2022 after Biden and Harris has been in office for more than 16 months.

The official White House website further claims:

“Bidenomics is already delivering for the American people. Our economy has added more than 13 million jobs—including nearly 800,000 manufacturing jobs—and we’ve unleashed a manufacturing and clean energy boom … America has seen the strongest growth since the pandemic of any leading economy in the world. Inflation has fallen for 11 straight months and has come down by more than half. And we have done it all while responsibly reducing the deficit.”[5]

“Would you eat them in a box? Would you eat them with a fox? On August 21, 2024 the Labor Department issued revised jobs figures for the 12 months through March of 2024 showing that the US economy added 818,000 fewer jobs than originally reported.

“The U.S. Bureau of Labor Statistics on Wednesday revised down its estimate of total employment in March 2024 by 818,000, the largest such downgrade in 15 years. That effectively means there were 818,000 fewer job gains than first believed from April 2023 through March 2024.”[6]

According to the Congressional Budget Office’s June report, the deficit projection for 2024 is actually 27% larger than the agency’s February projection and the cumulative deficit from 2025-2034 is projected to increase by 10% or $2.1 trillion. The largest increase was attributed to legislation providing aid to Ukraine, Israel, and other countries in the Indo-Pacific region.[7]

In order to finance deficits, the government must borrow and the projected federal debt according to the CBO explodes through 2050.

“You do not like them. So, you say. Try them! Try them! And you may. Taking a page from Sam-I-Am’s playbook, the Biden-Harris administration believes that if they say that things are getting better often enough and push high-priced “green eggs and ham” at us hard enough, we’ll eventually accept it. And as everyday Americans scrape to pay bills, the White House dismisses their misery as being misinformed and being unable to grasp the true state of the economy. According to Liz Peek of The Hill, this is downright offensive:

“Being told repeatedly that everything is great, when you can’t make ends meet, is deeply unsettling. It’s also insulting — the corollary implication is that you just don’t understand your own situation.”[8]   

To justify the high price of eggs and ham, the White House is actively recalibrating price data and rewriting economic history. And their hope is, as in the case of Sam-I-Am, that U.S. consumers will finally relent, “Sam, if you will let me be, I will try them. You will see!”

But Americans give the administration low marks on the economy and continue to worry about inflation, the value of the dollar, Wall Street volatility, and their retirement accounts.

And in an environment of high prices and economic uncertainty, they’re doing something else. They’re buying gold. Gold has risen almost 30% in 2024, 10% higher than a dozen “green” eggs and more than 27% higher than a pound of “green” ham.

According to a recent Gallup poll, Americans now list real estate and gold as the best long-term investments, and real estate is quickly losing ground to the yellow metal.

“The 34% of Americans choosing real estate this year is down sharply from last year’s record-high 45% … before housing prices skyrocketed during the pandemic. Higher interest rates over the past year have cooled the housing market, dampening consumer exuberance about real estate as an investment. Meanwhile, the perception that gold is best has nearly doubled, rising from 15% in 2022 to 26% today.”

Despite its historically high price, the 2024 Q1 Demand Trends from The World Gold Council indicate that central banks continue to buy gold at a brisk pace. This combined with robust over-the-counter buying by investors pushed gold demand up 3% year-over-year. [9]

And as the precious metal hovers near a record $2530/oz, Bank of America strategist Michael Hartnett urges Americans to “do what central banks are doing” and buy more gold — since it is now the only asset outperforming tech shares.[10]

Gold offers portfolio diversification and protection from Wall Street’s wild price swings along with the security of a physical asset with intrinsic and universal value. And as we head into an uncertain election season, rising recession fears, and exploding geopolitical tensions across the globe — it has become the safe haven of choice for 2024.

Sam-I-am relentlessly pushed “green eggs and ham” more than a dozen times in the Dr. Seuss classic. The White House has been pushing them for three and a half years. But the 36 million Americans who own gold, don’t have to be pushed at all. They understand gold’s long history as a symbol of wealth and royalty —and its role as a monetary standard and a timeless store of value.

[1] https://finance.yahoo.com/news/egg-prices-nearly-doubled-since-171357774.html

[2] https://www.bls.gov/regions/mid-atlantic/data/averageretailfoodandenergyprices_usandmidwest_table.htm

[3] https://news.gallup.com/poll/644690/americans-continue-name-inflation-top-financial-problem.aspx

[4] https://www.bankrate.com/banking/federal-reserve/latest-inflation-statistics/

[5] https://www.whitehouse.gov/briefing-room/statements-releases/2023/06/28/bidenomics-is-working-the-presidents-plan-grows-the-economy-from-the-middle-out-and-bottom-up-not-the-top-down/

[6] https://www.usatoday.com/story/money/2024/08/21/jobs-report-revision-growth-lower/74886965007/

[7] https://www.cbo.gov/publication/60039

[8] https://thehill.com/opinion/finance/4682020-thehill-com-opinion-finance-4682020-biden-economy-inflation-jobs-cost-of-living-spin-machine/

[9] https://www.gold.org/goldhub/research/gold-demand-trends/gold-demand-trends-q1-2024

[10] https://markets.businessinsider.com/news/commodities/gold-price-prediction-buy-record-highs-central-banks-pile-in-2024-8

Silver prices are poised for further gains in the coming months, driven by a combination of favorable macroeconomic factors and robust demand fundamentals, as per analysts at UBS in a note dated Monday. 

A weaker U.S. dollar, improving sentiment across financial markets, and record-high gold prices have all contributed to a recent modest rebound in silver prices. 

UBS analysts suggest that long-term investors should consider increasing their exposure to silver, with a target price range of $36-38 per ounce.

The recent weakening of the U.S. dollar and a shift towards a more risk-on environment among investors have provided a supportive backdrop for silver.

Read the full story HERE.

A special report on diversifying with precious metals — prepared exclusively for female investors by Thor’s female advisors.

Pink Floyd’s 1979 song “Comfortably Numb” opens with the following lines, “Hello, hello, hello. Is anybody in there? Just nod if you can hear me. Is there anyone home?” The song was released as part of “The Wall” album and according to music and lifestyle platform Neon Music, it has become “an anthem for emotional detachment and the struggle to maintain a sense of self in an overwhelming world.”[1]

The world of 1979 was volatile as the Iranian Revolution created oil price shock, advanced economies slowed, the U.S. dollar struggled, American hostages were seized in Tehran, The Soviet Union invaded Afghanistan, there was a nuclear disaster at Three-Mile-Island and consumer prices in America skyrocketed.

The U.S. Treasury Department summed up the economic challenges as follows:

“By 1979, inflation had moved up to a double-digit pace and threatened to spiral higher. The economy was showing signs of weakness, and many were predicting recession and rising unemployment. The mood in financial markets was becoming one of deep gloom, as the dollar was sinking and interest rates were soaring.”[2]

Pink Floyd’s lyrics underscore the detachment and dispassion of those trying to navigate a difficult moment in history: “Your lips move but I can’t hear what you’re saying” …. “The dream is gone. I have become comfortably numb.” Indeed, 1979 was social and economic chaos, but today the threats are far more severe.

The Worst Pandemic in 100 Years

It has now been a little more than a year since the official end of the Covid-19 pandemic — which the World Health Organization declared was no longer a public health emergency on May 5th of last year. Now ranked among history’s deadliest plagues, it’s easy to conclude that those of us who survived, have become “numb” to the sheer magnitude of the event.

The impact of SARS-CoV-2 was both deeply psychological and economic — lest we forget the quarantines, mandatory masking, travel restrictions, stay-at-home orders, school closures, and vaccine mandates — along with the very real fear of dying from a virus that killed over 7 million people worldwide. The financial toll of Covid has also been staggering. In April of 2020, an International Monetary Fund Blog entitled, The Great Lockdown: Worst Economic Downturn Since the Great Depression stated that “the magnitude and speed of collapse in activity that has followed is unlike anything experienced in our lifetimes.”[3]

A recent paper published by the National Library of Medicine states that “the COVID-19 pandemic has caused a considerable threat to the economics of patients, health systems, and society.” The authors cite the direct and indirect costs of the virus, healthcare expenditures, preventative measures, absenteeism, and a macroeconomic impact in the trillions of dollars with quarantine costs alone that exceeded 9% of global GDP.[4]

According to data from the Bureau of Labor Statistics (BLS) Current Employment Statistics (CES) survey, non-farm payroll employment in the U.S. declined by 9.4 million in 2020 the largest calendar-year decline in the history of the CES employment series. “As with virtually all economic activity in 2020, this decline was due to the coronavirus disease 2019 (COVID-19) pandemic, including pandemic-driven social and behavioral changes and government restrictions on business activity.”[5]

Critical supply chain disruptions during the pandemic coupled with high demand for goods contributed to soaring inflation in 2021 and 2022. This prompted the Fed to hike interest rates at the fastest pace in 40 years resulting in sky-high borrowing costs. And according to Liberty Street Economics and the Federal Reserve Bank of New York, not everyone has recovered.

“The recovery has been uneven and remains incomplete in many places. Indeed, while most metro areas have recouped the jobs that were lost during the recession (shown as blue dots), more than 25 percent still have not (shown as red dots). Most of these areas are concentrated in the Rust Belt along the Great Lakes, though clusters are present in parts of the South—Louisiana in particular—as well as in California, Oregon, and Hawaii. In fact, employment is still more than 5 percent below pre-pandemic levels in New Orleans, and more than 3 percent below in Honolulu and San Francisco. Likewise, sizable job shortfalls remain in Cleveland, Detroit, and Pittsburgh.”

Analysts warn that the economy is still adapting to the dramatic effects of the pandemic and has not yet processed the full impact on commercial real estate, healthcare, global trade, tight credit conditions, slowing economic growth and an underlying sense of altered destiny and grievance that we still don’t quite fully understand.

The First Presidential Candidate Shot in 56 Years

On a sunny, summer afternoon at a recent outdoor campaign event in Western Pennsylvania, a would-be assassin attempted to kill former President Donald Trump, the presumptive nominee of the Republican Party in the upcoming 2024 Presidential election. The gunman fired eight shots from the unsecured rooftop of an adjacent warehouse, hitting Trump in the right ear, killing one man in the crowd, and wounding two others.

It was a surreal moment for the nation and reminiscent of Bobby Kennedy’s assassination in 1968 at the Ambassador Hotel in Los Angeles. Kennedy was one of the leading contenders for the Democratic nomination in the 1968 Presidential Election. After celebrating a victory in the California Primary and addressing supporters in the hotel ballroom, he was shot while exiting through the hotel kitchen. Ironically, the fatal shot hit Kennedy behind his right ear.

The recent Trump shooting has raised serious questions about Secret Service protocols, site preparation, and overall competency. The Associated Press reported on some of the pressing questions surrounding the tragedy:

“The U.S. Secret Service is investigating how a gunman armed with an AR-style rifle was able to get close enough to shoot and injure former President Donald Trump at a rally Saturday in Pennsylvania, in a devastating failure of one of the agency’s core duties … The gunman, who officials said was killed by Secret Service personnel, fired multiple shots at the stage from an ‘elevated position outside of the rally venue,’ the agency said.”[6]

The entire nation witnessed countless viral video clips of rally goers yelling that there was “a man on roof with a gun.” There were other clips of the shooter suspiciously walking the grounds behind attendees, and additional reports that local police had seen and even encountered the suspect up to an hour before the shooting started.

According to Spotlight PA an independent Pennsylvania news service:

“The Trump rally shooting that day, which killed one man and injured three others, including the former president, has been called the largest security failure in 40 years. It has led to the resignation of the Secret Service director, a congressional investigation, and questions from lawmakers about how such a lapse could have occurred.”[7]

The shooting is symbolic of the dangerous uptick in political rhetoric, violence, and polarization in America. Trump has been the target of multiple impeachments, investigations, prosecutions, and a name-calling campaign i.e. fascist, racist, Hitler — that has dehumanized him to the point that a deranged individual might very well have climbed a roof with an AR-15 seeking to remove the “threat to democracy” that he believed Trump represents.

Regardless of the motivation, the attempt on Trump’s life elicits memories of other difficult ‘American moments’ as the French publication Le Monde outlined:

“The attack immediately joined the country’s collective consciousness, especially since it was filmed live. Although the former president escaped safely, the white roof on which the gunman stood is likely to be long remembered, like Dealey Plaza, in Dallas, Texas, where President John F. Kennedy was killed on November 22, 1963, by a gunman ambushed from the top floor of the school book depository. Similarly, there is the balcony of the Lorraine Motel in Memphis, Tennessee, where Martin Luther King was shot dead on April 4, 1968, by a right-wing extremist. Or the kitchen of the Ambassador Hotel in Los Angeles, through which Robert F. Kennedy was walking on June 5, 1968, after a victory speech in the California Democratic primary, where a Palestinian-Jordanian man opened fire. Or the Hilton Hotel in Washington, where Ronald Reagan was shot and seriously injured on March 30, 1981, 90 days after his inauguration.”[8]

July 13, 2024 is another dark chapter in American political history and reflects a country clearly on edge and gripped by radical dissent and ideological extremes.

The Largest Housing Bubble since 2007

On top of our post-Covid economic angst and rising political uncertainty is another pain point that strikes at the heart of the American Dream — home prices and home affordability. The United States is sitting in a massive housing bubble. Home prices have risen an astonishing 47.1% since the start of 2020.

According to Fox Business … “Home price growth so far this decade is on the verge of surpassing all the growth seen in the 2000s. During that time period, housing prices skyrocketed 47.3%, including an 80% spike before the 2007 housing market crash.”[9]

Prices are being driven by a variety of factors including low inventory, high mortgage rates, an undersupply of new homes, a spike in the cost of building materials, and the powerful “locked in effect” of the many homeowners who “locked in” historically low interest rates during the pandemic creating a disincentive to sell, move, downgrade or upgrade.

According to the non-profit civic group Strong Towns, home prices have also been manipulated as “decades of housing subsidies, down payment assistance, artificially low interest rates, money printing and endless bank support have turned the American home into a financial product first and a place of shelter second.”[10]

The question on everyone’s mind is will there be a price crash that crushes the economy and triggers the next Great Recession? The answer depends on who you ask. Bank of America maintains that home prices will remain high into 2026 but housing experts warn that if demand suddenly drops and there’s a rapid oversupply of homes — the housing market could nosedive. A large percentage of Americans now believe that is possible and according to Lending Tree, some are even hoping for it … “44% of Americans believe that the housing market could crash this year, and more than one third say they want the market to crash, believing it’s their only way to be able to afford a home.”[11]

We must be careful what we wish for. The subprime mortgage crisis of 2007-2009 triggered a punishing global financial crisis that resulted in the worst economic disaster since the Great Depression as U.S. GDP collapsed by 4.3%, home prices sank by 30%, and unemployment doubled.[12] And according to one prominent economist, that is precisely where we’re headed right now. Chris Vermeulen, the founder of The Technical Traders believes that both the US residential and commercial real estate markets are on the cusp of collapse and will see price drops of as much as 30%.

“A lot of people are struggling financially, and this is really the tip of the iceberg. Give it another two or three years — that’s when the real-estate market gets hit the most. People are starting to get laid off as unemployment rises. People have burned through their savings, and inflation is crazy higher. Eventually, people aren’t going to be able to pay their mortgages … [and] are going to have to start to sell their homes.”[13]

Hello. Hello. Hello.

Is anybody in there? Just nod if you can hear me. Is there anyone home? So much has gone on over the past few years socially, economically, and politically that experts fear we’ve erected a metaphysical wall to collectively coddle ourselves. These once-in-a-generation events have left us desensitized and nonreactive — and that’s not only dangerous for our psyche, but it could be disastrous for our finances.

In his book, “The Fourth Industrial Revolution” Klaus Schwab, Executive Chairman of the World Economic Forum, addresses the increasingly blurred lines between the physical and the digital, the fusion of humans and machines, the high connectivity, and the dangerous detachment of living in this place and time. “The changes are so profound that, from the perspective of human history, there has never been a time of greater promise or potential peril.”

The “peril” is apparent in a news cycle dominated by geopolitical conflicts, protests, inflation, interest rates, market volatility, Fed policy, debt, layoffs, and political warfare — making the notion of being “comfortably numb” as tempting now as it was in 1979. And just like 45 years ago, it’s critical to have a plan to protect our savings and preserve our wealth from the volatility of a dramatically changing and far more unpredictable world.

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[1] https://neonmusic.co.uk/unravelling-the-mystery-the-profound-meaning-behind-pink-floyds-comfortably-numb/

[2] https://home.treasury.gov/news/press-releases/js2001

[3] https://www.imf.org/en/Blogs/Articles/2020/04/14/blog-weo-the-great-lockdown-worst-economic-downturn-since-the-great-depression

[4] https://pubmed.ncbi.nlm.nih.gov/38365735/

[5] https://www.bls.gov/opub/mlr/2021/article/covid-19-ends-longest-employment-expansion-in-ces-history.htm

[6] https://apnews.com/article/secret-service-trump-rally-4e3415b1461f5acefbc8e1fadad0375b

[7] https://www.spotlightpa.org/news/2024/08/trump-assassination-attempt-secret-service-flaws-failures/

[8] https://www.lemonde.fr/en/international/article/2024/07/15/trump-assassination-attempt-political-violence-an-american-plague_6684742_4.html

[9] https://www.foxbusiness.com/economy/us-home-prices-have-surged-47-since-start-2020

[10] https://www.strongtowns.org/journal/2024/8/19/the-housing-market-is-a-bubble-full-of-fraud-and-its-going-to-pop

[11] https://www.businessinsider.com/personal-finance/mortgages/when-will-the-housing-market-crash

[12] https://www.forbes.com/advisor/investing/great-recession/

[13] https://www.dailymail.co.uk/yourmoney/article-13608961/economist-stark-warning-united-states-property-market.html

The Global ‘Carry Trade’ is Unwinding, Leaving Broken Markets in its Wake

For the past 15 years, Japan maintained its interest rates at or near 0%. This prolonged period of exceptionally low rates led investors to borrow trillions of yen, and invest these funds in stronger currencies and assets. 

This strategy, known as the “yen carry trade,” essentially constituted a bet that the yen would continue to depreciate in relative value. The strategy proved highly effective until last Wednesday.

In a notable shift, Japan’s central bank raised its interest rates slightly to 0.25%. While this rate remains remarkably low, it triggered a significant appreciation of the yen, which surged by 7.5% against the US dollar. This sudden spike in the yen’s value forced investors to cover their short positions, resulting in enormous losses totaling billions of dollars. This chain of events precipitated a substantial global sell-off as investors sought liquidity by offloading other performing assets.

The end of the yen carry trade this week has had far-reaching consequences for global markets. Many investors might be perplexed by the sudden downturn in their portfolios, and this development largely explains the recent turbulence.

An additional bearish factor contributing to this situation, which has not been widely discussed, is Japan’s reliance on oil imports. Japan produces approximately 2 million barrels of oil per day but consumes double that amount or more, necessitating substantial oil imports.

Current geopolitical tensions are exacerbating an already volatile oil import market. Iran has threatened a significant strike against Israel in response to a surprise attack on Tehran last week. This retaliatory strike is anticipated imminently, possibly even today. If such an event unfolds, it could prompt Israel and the United States to take military action against Iran. In retaliation, Iran might close the Strait of Hormuz, a critical choke point through which 20 million barrels of oil pass daily.

The closure of the Strait of Hormuz would cause a dramatic increase in global oil prices, severely impacting Japan’s economy due to its heavy reliance on oil imports.

In summary, these interlinked developments underscore the precariousness of the global economic situation. The sudden end of the yen carry trade and the potential for escalated conflict in the Middle East are formidable challenges. It is crucial for all parties involved to exercise restraint and seek diplomatic solutions to avoid a broader conflict with Iran, as the stability of the global economy likely hinges on such efforts.