Fed Under Attack; What's Next For Stocks, Bitcoin, Gold As Bull Market 'Ends' | Gareth Soloway
Summary
Federal Reserve Decision: The Fed cut interest rates by 25 basis points, aligning with market expectations, but there was no consideration for a 50 basis point cut, indicating a cautious approach to monetary easing.
Market Reaction: The S&P and NASDAQ remained flat, while gold and Bitcoin experienced minor declines, reflecting a lack of surprise in the Fed's decision and ongoing data dependency.
Inflation and Tariffs: Inflation pressures from tariffs are impacting the labor market more than consumer prices, suggesting companies are absorbing costs to avoid raising prices.
Economic Projections: The Fed projects slight economic growth and stable unemployment through 2027, but Gareth Soloway anticipates short-term inflation increases followed by deflationary pressures from a weakening labor market.
Investment Strategy: Investors are advised to consider hedging strategies like buying puts or investing in defensive stocks with dividends, as market volatility may increase with potential recession indicators.
Bitcoin and Gold: Bitcoin's volatility is decreasing, aligning more with tech stocks, while gold's price could surge if the Fed's independence is compromised, potentially reaching $5,000 according to Goldman Sachs.
Global Currency Dynamics: The US dollar's weakening could lead to a shift in reserve currency status, with countries diversifying their reserves into gold and Bitcoin, impacting global financial stability.
Market Outlook: Despite current market highs, indicators such as high margin levels and retail investor behavior suggest caution, as historical patterns show these precede market corrections.
Transcript
The Federal Reserve cut interest rates by 25 basis points today on Wednesday the 17th as expected by the markets. Some may have been disappointed by the fact that uh Jerome Pow said that a 50 basis point cut was not even widely considered by FOMC participants. We'll talk about market reaction to today's announcement, uh Fed projections, uh the economic projections by the Fed, and the general outmarket outlook by uh our next guest, Gareth Soloway, chief market strategist and president of Verified Investing. Welcome back to the show, Gareth. Good to see you as always. >> Good to see you, too, David. Thanks for having me. >> I spoke to you about a month ago when um it was unclear what the Fed was going to do at the time. They were still data dependent. The Fed has kept rates unchanged uh this year and this move today was well telegraphed. Not a lot going on in the markets. The S&P is kind of flat on the day. The NASDAQ is kind of flat on the day. Gold is a bigger mover, down about 80 basis points, so it was at $3,700 yesterday. Now it's back down to below $3,700. Bitcoin's down close to 1%. So some movement, not a lot. So I'm guessing the markets didn't take anything pal said by surprise. The fact that he remains data dependent also I guess it's not a surprise. People were looking forward to what the Fed dot plots would reveal and what the projections would reveal. What do you what do you make of what happened today? How do you interpret the FOMC meeting? >> Yeah. So I listened into so so number one the 25 basis point cut was everyone knew that was coming. That was no big surprise. The Fed watch tool had priced it in over 90%. So, anytime it's 90% plus, I mean, that's a essentially as sure of a thing as we can get. But this is the kicker. He said that many members on the Fed board are against even two rate cuts in the remainder of the year. He said there was one Fed official that was for more than two rate cuts into year end. I think we can all surmise that might be the new Fed governor that Trump just appointed. But I thought it was very interesting. He seemed So, number one, when I was watching his commentary, he seemed very defeated. um he seemed very tired. Um I don't know if that's the stress from Trump or if that's the stress from just the job in general. It could be a combination. Um maybe even what's going on with Lisa Cook. But um but I did think that that was interesting. And then he did admit that at this point we're starting to see inflation pressures that are coming from tariffs. Um and we're also seeing a weakening labor market which is stagflation. And I just want to show this because while the markets have basically gone back to where we were prior, there is absolutely absolutely a big move intraday. So what we saw here is initially when the Fed, this is by the way the 10-minute S&P chart, SPY chart. Initially we popped, then we had a huge selloff and now we're coming all the way back. And I want to just show you what the US dollar did here. This is incredible. So the US dollar intraday had a huge drop initially when the markets initially popped. Then as the dollar rallied back up, the markets started to sell off and now that the dollar is coming back in, we're seeing the rally back in. So we're really seeing this inverse relationship again with the US dollar that has been very consistent. This is a lot of algo trading. I also think that the markets have rallied back because there's still this buy the dip mentality. investors and again, you know, I we have we have lots of feelers out there with people commenting on videos, but there was this general consensus among retailers that a Fed rate cut would be really good for the stock market as well. And so, they're getting that and there's more money flowing in. And then lastly, we got to take a look at the 10-year yield. The 10-year yield, holy cow, initially dropped to 3.99%, then shot up to 4.08% and is now pulling back. But again, even with the Fed rate cut, we're not seeing the 10-year yield really drop at this point significantly. So there, you know, yes, we're seeing the markets kind of flatten out to where they were prior, but I would argue that the underpinnings of what's going on is very, very interesting both with Jerome Powell's commentary and with the market reaction. >> A good question was asked by a reporter about the fundamentals of the economy. The question was uh we haven't seen a lot of the um inflation data reflect tariffs. Inflation has picked up but maybe not as fast as some people could. The question was uh does POW think that tariffs are being quote unquote eaten by the companies? In other words, just absorbed through the prices and uh not really passed through the CPI data and instead the effects of those tariffs are passed down to the labor market. In other words, tariffs causing more impact on the labor market negatively than more impact on inflation negatively. What do you think? >> I actually absolutely agree. I think um there's this kind of feeling amongst these companies that are getting, you know, the inflation pressures from the tariffs. They don't want to be viewed as raising prices because we all know that the president will tweet and kind of rip them and it'll be a very bad look. So, there's more of a case of well, let us eat at least a majority of these tariffs. But the problem is it affects the consumer regardless. Right? So it's either on one end where we're paying higher prices which is happening a little bit but not to the full extent or it's that these companies can't hire as much and they start laying people off and then it affects consumers on the layoff side where they can't then buy as much u as many products and goods and services because they've been laid off. So either way it's a detriment to the economy here. Uh we're just seeing which way it's coming through. Let's take a look at uh the Fed's projections of economic growth and we'll overlay that and compare that with your projections for economic growth. Gareth, this is uh median and central tendencies and ranges of economic projections changes in real GDP uh to hover around. So that's currently where we are uh projection slight improvement in growth over the next two years. There's the unemployment rate. The Fed is projecting uh basically little change throughout 2027 and then the PCE inflation. They are expecting inflation to come down towards a 2% target long run by 2027. Core PCE, same story. Let's just stop here and uh see if you agree or disagree with any of these projections based on your own research and anecdotal um evidence. >> Yeah. So, so the projections that I have anyways that I've done the number crunching on, it looks like inflation will continue to be in the short term up to to see upside. So, we're going to see probably in the next few PPI CPI numbers a little bit of an increase. But as the labor market weakens, and this is what happens generally during pre and into recessionary periods, what we start to see is that that it actually has a deflationary impact. And so the inflation that we're seeing from tariffs will eventually be offset by deflation of the consumer struggling more and more as the labor market and the economy weakens. And that will bring us down towards at least 3% maybe a little bit below 3%. The problem is is that a good reason to see inflation coming down, right? Is is that the reason we want to see inflation coming down? And then how does the labor market or how does the Federal Reserve react? Do they just start throwing more money at the system? Does the government increase spending? Does it then kickstart inflation? But I do think again inflation will slowly come back down, but not for good reasons, but for bad reasons, mainly the labor market and economy weakening. >> Before we continue with the video, let me tell you about a very important topic. How to protect your privacy. Now, your private information doesn't just live in the inbox of your phone. It's being collected, packaged, and stored, and tracked by data broker websites all over the internet, even without you knowing. That's where today's sponsor comes in. Delete Me. I use Delete Me to protect my privacy. And here's how. It helps you. It's a platform that helps you remove your personal data, like your name, address, and contact info from hundreds of these data broker websites. When you sign up, you'll get a detailed privacy report showing where your data was found and what's already been removed. And Delete Me keeps working throughout the year, scanning and clearing your information regularly. It's an easy way to take back control of your digital footprint without trying to track everything down yourself. Go to joindeelme.com/davidin and use the promo code davidin at checkout to get 20% off of US plans link down below or scan the QR code to get started today. Right. To what extent will the labor market weakened Gareth? Weaken weakening could be a slight tick up in initial claims or it could be, you know, a pandemic style sort of jump in unemployment to the double digits. Those are two extremes. Which end of the extreme is more likely for you? >> So, I do think I do think we're headed towards a recession. Um, you know, now listen, I thought that for the past year. Uh but it's it's been a matter of US government spending and the essentially so much liquidity, so much wealth effect from the stock market that in my opinion has kept us in this elongated kind of anti-recessionary period. But the let's be fair, the bottom 50% of this country at least are already in recession uh if not even you know more than 50% in a deeper recession. um anyone who's invested heavily in the stock market is doesn't mind the inflation and maybe they do mind but they're able to handle it and I think this is where we start to see these kind of this kind of variance where we're looking at a market where again there's two different different players right so again you're looking at people that are already in a recession versus the investing players that are not yet there but they will get there once the stock market starts to fall >> is it possible that we'll have some sort of labor market recession but not outright recession. Technically speaking, maybe growth chunks along in positive territory. Maybe real GDP is still positive, not very high. But then we get a slowdown in labor growth, more layoffs, unemployment rises. So technically speaking, real GDP is still positive, but everything else just just kind of slowing down. Would that still qualify as a recession in your books? >> Yeah, I think I think there is different ways to view a recession, right? Right? I mean, you look at the GDP aspect, that's one way of measurement. But again, the question is where does AI play into that? Where are these other factors in it? And if that's a very small portion of the population that's affected by AI and the growth of AI, like let's say let's say it's 20 or 10%. Just because that is an outsized period, does that mean that we're not in a recession because the other 80% is struggling? I would I would say again, we're going to have to redo our views of what a recession is. And and I think that will come become more and more apparent in the coming years. The other thing I want to mention here folks, this is really really interesting. So if we go to the charts here again, and I always love bringing up the charts for you guys, but if we look at the S&P 500, all right, so number one, the S&P 500 here is struggling inside of what we would call a wedge pattern. But one of the things that I've gone and done research on is that if you compare 2007, all right, look at this. Look at this chart here. Here's 2007, okay? Housing topped two and a half to two years prior to the stock market topping uh before the first rate cut. The first rate cut in 2007 was on September 18th. Today, granted, it's not the first. We had one a while back, but this is the first one where we're seeing the labor market weaken was on or is on September 17th. So again, interestingly enough, if you look at the data, when did housing top out here recently? It topped out about two to two and a half years ago. And so, you know, it's it's it's, you know, it's not it's not meaning that this is exactly how it's going to play out, but I think investors have to really take a close look at what comes before a recession. In this case, this was the financial crisis. And then you look at other factors like delinquencies on credit cards. And David, I know you see some of this data as well, but delinquencies of credit cards 90 days or beyond are now at 2008, 200 level, 2009 level highs. And so there's more and more, and we just talked about this with how do you predict or how do you say when you're really in a recession, there's more and more evidence that more and more of the public is struggling in a major way. And I would dare say that again it's eerie to see that on September 17th. Today we got that first rate cut going into a weaker labor market in 2007. It was on September 18th, 2007. And and again we saw the labor market weakening um 2 and 1/2 years prior or topping out 2 and a half years prior, which is what we've seen now. >> I'll give you a personal anecdote. I was just in Colorado last week. I got back over the weekend. I was taking an Uber on my way to the airport in Denver and the the the Uber driver was telling me how things have slowed down in for tourism in the city. I asked him how's business, you know, chitchat. He's like, "Well, typically in the past in past summers it was really busy and now it's just not so much. I don't know what people were going. I don't know if they're going somewhere else." And I said, "I I maybe it's nationwide cuz I was in Vegas a couple months ago in May and the same thing happened. It was relatively quiet for Vegas uh back in May when I was there. So actually people have been talking to about that on my show. The Vegas index kind of a leading indicator for discretionary spending. That's just things are slower everywhere. I wonder how you can trade that data because everywhere you go you kind of you see evidence of slowdown in tourism, discretionary spending, leisure, and hospitality, but at the same time markets are hitting all-time highs. Gold's hitting all-time highs. Bitcoin's hitting all-time highs. So, how do you how do you reconcile this seemingly big disparity um between the real economy's growth and the growth in real assets and financial assets? Yeah. And this is what happens every bull market at the very end is that you have a disconnect, right? And you could even say this disconnect is with gold. Gold and the S&P very rarely continue to make new all-time highs together for as long as we've seen recently. And that tells you something. Both of those will not continue to make new all-time highs. But going to this other factor is you're right, past bull markets just before they end, the data starts to weaken, but there's still this FOMO, this fear of missing out amongst retail investors. And what I look for in the data that tells me and puts me on alert is margin levels, right? We're now at all-time highs on margin, which is people borrowing money to get into the market. All right? We now have people investing in in meme craze again. We've seen stocks that that are now saying, "Oh, we bought some chain link or we bought some Ethereum and they go up 3,000% in a day." These are the same things that occur in every cycle. And it's a human psychology trait to where you feel like you're missing out. And at that point, you have to play catch-up. And by the way, hedge funds find this this the hard way, too. If into the end of the quarter, they are not performing like the rest or or as the market is, they have to just force money. They force money into the market and they try to play catch-up. And so this is something that is a is a human psychology trait, but it's also an indicator um of market tops. And so again, whether we're topping today or whether it's a week or a month away, that's hard to predict and I'm not a great predictor of that. But what I do know and I've been through 99 2000 2007 um you know through COVID all of these signals occurred just before even in 2021 we saw the same thing with Bitcoin with crypto and with memes like GameStop and AMC. And so again it's more of a breadcrumbs where it's dropping these breadcrumbs and then it's up to us as investors to start pulling the reins back and being a little bit more cautious. >> So here's the ultimate question especially after today's Fed meeting. What do you do? On the one hand, there's weakening economic data. Perhaps you're right. We're in the tail ends of a bull run. We'll see. Uh but what do you do with the fact that the Fed is now in an easing cycle? Now, the extent of their easing is debatable. Maybe they'll cut once, twice. Morgan Stanley said three times this year. Again, we'll see. But the Fed has shifted its stance from we're not ready to cut to now we're ready to cut. On the one hand, there's weakening economic data. there's a tail end of the bull rally. On the other hand, there's the argument you should not fight the Fed. So, what do you do as a trader then? >> Well, so the first thing is I always look at data and and and the first thing is to say, okay, in past periods where the Fed begins to cut rates after, you know, an expansionary period begins to slow down, what does the stock market do? And believe it or not, and this goes contrary to kind of the the narratives that have been spun out there on social media and even in mainstream media, when the Fed begins to cut rates, the markets actually start to fall. And so this is very interesting because essentially the markets are forward-looking, meaning that we're all buying stocks going into the cut because we're assuming that the cuts will be beneficial. But by the time you get to the actual cut, people have already bought in. They're all in the markets. And now there starts to be this fear of people saying, "Uh-oh, wait a minute. Is the Fed behind the curve?" And you're going to hear this more and more now in the coming days, is wait a minute, can the Fed not cut as much as they should because inflation is high. You know, these other Fed officials saying we don't even support two rate cuts into year end now, which is what the Fed funds tool is telling us. And so for us as investors, there are ways to protect ourselves. Number one, you can buy buy puts on the market with the VIX down below 15 or around 15. buying protection via options is very very cheap. It does cut into your gains though. There's no doubt about it as it as it all will. Um or you can just lighten up. There's no one's no one goes broke taking a profit and that's something I always tell people. So if you have a thousand shares of Nvidia long, what you could do is you take a quarter off the table or a half and let the other half run. Put a break even stop or a in the money trailing stop. There are lots of ways to protect yourselves. For me, I'm a little bit more aggressive. So I'm shorting the market into this. I'm looking to get that downside benefit. But again, if you're dead on being long, at least protect yourself. >> Are there assets that you think are natural hedges? Let's say you don't want to trade options, you're not advanced, or you don't want to sit all day and look at the screen or deal with options decay. Um, are there things that you can buy long that may be a hedge or a diversifier against equities? >> Yeah, I mean, I think something like the VXX as a short-term trading vehicle, it tracks the VIX, right? So if you have let's say a a full portfolio of longs, maybe you buy a little VIX which goes up if there's fear increases essentially if the market sells off. So there are ways to play it. There's enough ETF vehicles out there today to kind of hedge yourself. Um you could also just go more conservatively like I continue to think like a name like Fizer, you know, it doesn't it's not a sexy play. Um Dr. Pepper, this is another one. Kurig Dr. Pepper. um they pay good dividends and they're they're near their 52- week lows and and so you look at something and say, "Wow, these are trading at 12 or 13 forward PE ratios and they pay four to 7% dividend which protects me, right?" So if I'm in Fizer and it pays a 7% dividend, even if the stock falls 7%, I'm break even. Now, if the stock goes up and it pays a 7% dividend, maybe I make 15%. Right, over the course of a year. And so there are other ways. People just have to think outside the box and it's very hard to because then you feel like you're missing out, right? Oh my gosh, but I'm going to miss the next 3% or 5% in the next week or two on the stock market if it continues to rally. But I always say to people, remember, it's not about how much money you make, it's about how much money you don't lose. Let's take a look at some charts then and uh see what you're looking at for short-term, medium-term uh price action. Yeah, let's start with the S&P. Yeah, the S&P again, by the way, amazing trend line here. You can see on the S&P, this trend line, by the way, goes all the way back to October of 2023, connecting through that low, which was really the start of the bull market after the last bear. Then you have the low in August of 2024, which was that massive sell-off. And then what we saw is during liberation day, we saw the markets collapsing through that and now it has become resistance. Right? So, every time we're hitting that, hitting it again and again, and even here recently, we've hit it, but now starting to pull back just a little bit. We can throw another arrow up there. That's a level that as a technician I'm really watching. If we flip over to the QQQ, look at this. This is a parallel channel that gives us our low pivots going back to basically 2024 and multiple high pivots. And look at how the market behaves every time it hits it. And to me, this means the market has more risk of downside right now versus upside. Now, if we break through this level, okay, that's different. Now, you open up, it's blue sky again, and you could start to go higher. But I love looking at charts and not overthinking it. And I say to myself, all right, listen, if if we pulled back here, right, then what's the odds of us pulling back here? Especially when you go back and every time you're hitting this line, you're pulling back, right, over and over again. And so, I don't think overthink it. just let the chart tell us what the likely level is and then again keep a tight stop and if we break out you stop out take a small loss and off to the races the market can go again. >> Are you going to compare this cycle to the last time the Fed eased in 2021? Um in other words is this the beginning of a bull run? Um that uh I know we talked about this being the end of a bull run, but could we see this sustaining for quite some time is my question. I didn't phrase that properly. >> Yeah. Well, I I think again the last time the Fed started to really ease, you know, we were coming obviously out of COVID. Um there was there was some craziness going on there. The markets obviously were kind of in a different state. So I'm not a big fan of using I almost look at that as an outlier impact because of how uh what we were coming out of. Right. So again, you had that massive sell in in 2020 and then this rip roaring move. And you're right, the Fed was kind of worried. Oh my goodness, we need to save the economy. we need to save the world. Much different now. Much different now. In fact, what we're seeing now, by the way. And then housing prices were just going straight up at that during that period versus now we're seeing the housing market unbelievably weak. In fact, I have realtors in the South that are telling me it is so bad in places like Florida that it's as bad as 2008 in the real estate market. And that's really scary because remember, people's biggest asset is their home. And so if all of a sudden your house which was valued on Zillow, let's say at 600,000 is now 500,000, what does that do to your mentality about consumer spending, are you still spending as much versus when your house was going up 100k a year? My guess is you're starting to pull back on spending. >> Well, you're right. There's actually studies done on this. When your net worth declines, even if your cash flow stays the same, uh your spending pattern changes. Uh so Okay. I I just just on that note, why do you think h home prices are moving the way they are? I mean, mortgage rates aren't changing right now. So, what's going on? >> So, with housing, it's it's the biggest issue is the underlying costs of owning a home. They have skyrocketed. And I can vouch for this. I'm a homeowner and it is beyond ridiculous. So, obviously, interest rates going up have made it much more costly. We all got very used to low 3% 30-year mortgages a few years ago. Now it's obviously 6% was 7%. That's a huge difference in a monthly payment. In addition, home prices or values have gone up. So, you know, you're buying a house that used to be 300,000. Now you're paying 600 for that and the interest rates are double of what they were a few years ago. And then lastly, this is the biggest one is that once you own that home, the cost of home insurance, the cost of of you know, everything else to do with the house, even fixing things in the house, has skyrocketed with inflation. And that really makes home ownership even more expensive. And people are done with it. Heck, I'm done with it. I mean, this it's ridiculous at this stage um to have to pay so much. I mean, we're told and we're bred to believe that owning a home is your your avenue towards like financial independence and wealth. In reality, it's starting to suck people dry. And I think that's one of the big issues. Okay, now let's take a look at Bitcoin. Bitcoin is moving in lock step once again uh with the stock market down a little bit more. It's just oscillating between 115 116. Yeah. Let's take a look at this chart and um do you see it going above 120 by the end of the year? Where do you think there's more downside? Well, I'm going to show you a trend line that is going to make the determination of whether or not this thing goes to new all-time highs into year end or if it drops to 100 or sub 100,000. And to find this trend line, it's amazing. I just found this today and I love this is why I love trading with charts is because you find things that just are remarkable. What I did here is I took the high from 2017 on the regular chart. So not logarithmic, just regular chart. Take that and connect it through the highs of 2021. Okay? So we're basically connecting it from the high of just before the bare market in 2017, the all-time high then to the all-time highs in 2021 and stretch that trend line out. And what you'll notice is in late 2024, okay, in late 2024, we hit that exact line again and again in early 2025. And then briefly, we got above it and made a new all-time high. And then we came back below. Then we got above it and made a new all-time high and then came below it. And then look, it's struggling here at this line. So what the chart is telling me is this is that this trend line, number one, it was major in 2017, 2021, 2024, and 2025. But if we can get back above the orange trend line, then the odds are just like over here. We got above it, we made a new all-time high. We got back above new all-time high. Then chances are we're going to make a new all-time high. If we can't, then watch out below because every time if you go back here, right right here, even in 2025 January, 30 plus% correction. You go back to 20 2021, we had the the 65K down to 30K, then the 69 down to 17K and even in 2017, 20,000 and we bottomed out around 3500. And so the point being is that if if Bitcoin cannot get through this level, it's an omen on the charts here that we're going to get a bigger correction at least below 100,000. How much lower is tough to know, but again, I watch this level. It's at 117,000. So if we get above 117,000 and hold there, I think you're going to 126, maybe 130, maybe even 150. But if we can't get above it, you're looking at sub 100,000. >> There was research done by institutional investors Fidelity. Uh I read recently that says that Bitcoin's volatility profile is now on a 12 month or 24-month rolling basis. I can't remember the time period they use, but it's now lower than tech stocks overall. meaning Bitcoin as an asset class is no longer super volatile. It's on par, if not more stable on a riskadjusted basis than some tech stocks. Now, I want to get your opinion on this. If that were the case, uh should we start making the assumption that perhaps this time if it were to decline, it won't go down 50 70%. It'll go down maybe 20 30% in a given cycle and up the same way as well. Both up and down. >> I would 100% agree with that. The more institutional money gets involved, the more people view it as the dream, which is at least for me. I can't speak for everyone, but I've always viewed Bitcoin as the digital gold. Stated 21 million run, that's it. Therefore, it has that value, the scarcity aspect to it. And so, really, as more players get involved, the volatility should drop. And we're even seeing that, right? I mean, if you look at the drop we saw in 2017, then 2021, and then the last time we hit this trend line, we only saw a 30% or change correction. And so it makes a lot of sense that if we did fall, it probably only declines in that 30% range uh from those highs. And I think that makes a lot of sense and I do think that's what what will happen. So I think again it's adoption as that digital gold. It slowly is trading more and more like a gold type type asset and I think that's a very healthy thing for Bitcoin in the long term. >> Do you think gold and Bitcoin will stay correlated? They have been this year but then again gold, Bitcoin stocks have all been correlated this year. The last time we saw this happen, it was 2022 when they all went down together and before that 2020. This is interesting. >> Yeah, I I think for the most part they will. I do think for short periods of time where you see major stock market selling, then pan panic will probably bleed into Bitcoin a little bit more. But in all fairness, in 2020, gold sold off initially too before roaring back. Um, so they all sold off together because fear beates begets fear. Um, but I do think overall they'll become closer and closer in terms of correlation. uh eventually until they could trade, you know, up days up days exactly and down days exactly down days. But again, that's that's years down the line where they become really really correlated even more so. Do you think uh let's talk about gold now. Gold at $3,600. Oh, it's back up to $3,700. It's moving so fast. It was below $3,700 a couple minutes ago. Now it's back up. Okay, so gold at $3,700. Unprecedented levels. Uh banks are now projecting 4,000. I think Goldman Sachs is projecting 4,000. And this is interesting. actually I'm I'll pull up this report for you. Goldman Sachs is projecting $5,000 gold if the Federal Reserve loses independence. I'm going to find this um report. Gold Yeah. Uh gold could hit $5,000 if the Fed is uh Fed's independence is somewhat compromised and they uh and they have to look are forced to lower rates. Here we go. Goldman Sachs $5,000. Um, in a major analysis released this week, the investment bank outlined scenarios where gold may reach $5,000. Uh, investors feel that the politicized Fed would slash rates to reduce up the economy. Short-term stoking inflation fears down the road. Goldman's analysts are quite direct about the implications. A scenario where Fed independence is damaged would likely lead to higher inflation, lower stock and long dated bond prices, and an erosion of the dollar's reserve currency status. In contrast, gold is a store of value that doesn't rely on institutional trust. Let's just talk about this for a minute. One of the issues brought up today at the press conference. It was asked once, I think maybe more than once, I can't remember, but it was asked near the beginning, what does uh Chair Jerome Powell make of the recent uh meddlings, shall we say, of the White House with the Federal Reserve? How does Jerome Powell view the Federal Reserve's independence currently? And all Pal said was, "We continue to be committed to independence." That's all I'm going to say for now. All right, let let I'll let you evaluate whether or not their independence is going to be damaged and whether or not this assumption by Goldman Sachs is logical whereby if they have further damage where they lose their independence, what happens to inflation? What happens to rates? What happens to assets? Yeah. So, this is the kicker, right? Is that we're already seeing the erosion of their independence? And again, it's it's a slow virus that is eating away or a bacteria that's eating away at the Federal Reserve. But anytime you have the president of the United States, arguably the most powerful man in the world, attacking the Federal Reserve so openly on social media, it's going to make other countries think twice, right? So, you know, that's one of the things is we are very reliant as a country on other countries buying our debt, right? We need them to finance our expenditures uh which now are massive. In fact, you know, 1 trillion just in interest payments per year. And so this is only going to make interest rates on the long end of the curve go up. Now, listen, the Fed can keep the the short end controlled because that's what they control, but they can't control the long end. And ultimately, that is going to be the issue. I want to show you something here on my charts that really has me concerned. So, we're going to look at the DXY. The DXY on this chart has shown us that it has broken major support that goes back to 2022. Look at how the chart kept bouncing off the Dixie, the DXY 10. >> Sorry, Gary, can you can you pull up your chart one more time? But yeah, uh you're right. The DXY has taken a huge hit 20225. Let's see what happens next. So, so yes. So, with the dollar here, and this is so concerning to me, is that the dollar was holding above this 101.5 to about 100 level on the Dixie for multiple years. Recently, as we saw the attacks on Jerome Powell start to take hold and the liberation day tariffs begin to take hold, the dollar broke that support, tried to get back above here, failed, tried again, and is now breaking to the downside. We're getting a bounce today on the back of the Federal Reserve commentary. But this is the issue is that the dollar is now attacking a support zone that goes back to the lows of 2008. A trend line or trend line zone that goes back to 2008. Now, mind you, this is important because this was when the financial crisis began. The dollar began to gain relative strength against a basket of currencies. If you break this zone, basically anywhere between 96 to 94 on the Dixie, the DXY, you likely are headed back to the7s, basically 71 on the DXY. And you can't blame other countries, right? Other countries are looking at the US dollar as their reserve currency and they are beholden to the US. They basically have to bow to the US in many situations. And so it's now between tariffs and what the president has done, it's starting to make these other countries say, "Wait a minute, you know, do we want to let the US have this much control over us or do we need to diversify away from dollars and buying US debt so that we are not so beholden to any of their whims?" And that's what's happening. Absolutely. Poland recently said 30% of their reserves would be gold. Now we've seen Bitcoin starting to peak into reserves of countries. Countries are now selling dollars and reducing their exposure. Now listen, the dollar, we're not going to see the dollar collapse. Reserve currencies historically don't just collapse out of thin air. But is it the beginning of a longer trend now of the dollar slowly losing that reserve status? I do believe it is. And if we break 96 to 94 on the Dixie, the DXY, that is the catalyst to further downside and significant downside. >> Right. What happens to markets when the dollar slides? Is that positive or negative usually for stocks and risk assets? >> So in general it's it's positive. Um it's positive as long as there's not associated fear. So for instance during the liberation day period when the dollar was declining there was fear in the markets because of what was causing it and the markets fell. As long as it's a slow slow grind lower investors are happy with it. Gold generally will go up. Bitcoin generally will go up. Risk assets will go up. But if you get in a situation where people start panicking over the dollar decline, then forget about it. Stocks literally could crash. >> Well, let's keep tabs on that scenario. Will stocks crash by the end of the year? Generally speaking, which assets are you long right now, especially following the first rate cut in a while? And which assets are you either on the sidelines of or about to short? >> Yeah. So, so I'm long volatility right now. Volatility has gotten way too low. So, I'm long VXX right now. I'm just looking over at my portfolio here as again um I'm watching what it's doing but ultimately long volatility uh generally short tech up here um technology I'm long Russell Russell IWM type stuff we've seen as interest rates come down the Russell is the one lagard I think there's upside there I was long China in fact I think we talked about this in my last interview about a month ago saying that China is one of those places that should get some good money flow and we saw BU go up 50% Alibaba go up. I mean, incredible rallies in those that they've already run. I think you step back from them. I like the EWZ, which is the Brazil ETF. Essentially, look for money as the dollar erodess and confidence in the US system erodess. Look for other areas to put money. The only places I'm long in the US are defensive names like a Fizer, I mentioned, Dr. Pepper Purig. Uh these names that again pay a dividend and are still cheap relative to their valuation metrics. >> Okay, good. Uh, any other trades you're making right now that may be independent of the Fed? Pun intended. >> Oh my goodness. Yeah, I wish there was something that was independent of the Fed. So, as of now, not really. Um, I'm certainly not buying gold up here. I will buy on pullbacks if we get a good strong pullback. Silver I continue to like, but same thing. It's just had too much of a run. Um but again essentially if you're looking at years out metals eventually Bitcoin once it pulls back I want to really start loading up again on that as again you just have to look at the writing on the wall. You know there was this big push with the Doge type thing to cut spending. I don't even know if anyone remembers that anymore. Didn't happen. I mean yeah there were a few cuts here and then it kind of went away right and then this big spending bill came out. And and I'm not saying this in terms of Republicans or Democrats. They're all the same. They just they want to stay in power so they got to spend money to stimulate the growth. But the problem is we all pay the price of that. Right. >> Final question. This uh we haven't discussed this yet. So uh Steven Moran who was just recently appointed um uh governor on the Fed. He dissented today. He called for a half point cut when they only got 25 basis point cut. Now Jerome Pal did say that it was not widely uh discussed that there would be a 50 basis point cut. I don't know if that's a play on words, but clearly it was discussed because one governor at least dissented. And so the question is whether or not the markets will see this descent as one of two things. Either impetus for more liquidity because at this point there's going to be more dissension, more pressure to cut by not just 25 but 50 basis points again or that there's just fragmentation amongst the Fed. and generally speaking, noise and market volatility that we should ignore. What do you make of this story? >> So, this is a direct nod to his boss who just appointed him, right? Um, you know, this was probably a prerequisite to make sure that he voiced a 50 basis point cut. Um, to me, it eats more away at the Fed independence. I mean, when you're talking about a 50 basis point cut, when you have CPI coming in at 04%, multiply that out by 12, you're at 3 to four, maybe even above four in terms of consumer price inflation, you know, whatever happened to, you know, point 2% inflation. And so this is this is my concern is that the erosion I of the Federal Reserve and this is just another kind of proof in the pudding if you will is going to eat away at the long-term prospects for the US as as we slowly fade away from being this grandio superpower that controlled everything. So again, you know, and that's the market. I don't know if you guys heard that. That's the stock market closing right there. But the point being is that the other Fed officials said two or less and you had one saying two or more who was that. I didn't even need to know the person. I could have told you even before you brought it up. It was pretty obvious who it was going to be. >> For sure. Gareth, thank you so much for your update. We'll leave it here. Where can we follow you um and uh learn more from you? >> Uh verified investing, all charts and data. No hype, no nonsense. It is what it is. The charts tell us the future with a high probability. Not perfect by any stretch, but if you're interested in learning about charts and learning how to read charts, verified.com is the place. >> Excellent. Thank you very much, Gareth. We'll put the links down below. Follow Gareth there. Appreciate it. We'll speak again soon. Take care. >> Thank you. >> Thank you for watching. Don't forget to like and subscribe.
Fed Under Attack; What's Next For Stocks, Bitcoin, Gold As Bull Market 'Ends' | Gareth Soloway
Summary
Transcript
The Federal Reserve cut interest rates by 25 basis points today on Wednesday the 17th as expected by the markets. Some may have been disappointed by the fact that uh Jerome Pow said that a 50 basis point cut was not even widely considered by FOMC participants. We'll talk about market reaction to today's announcement, uh Fed projections, uh the economic projections by the Fed, and the general outmarket outlook by uh our next guest, Gareth Soloway, chief market strategist and president of Verified Investing. Welcome back to the show, Gareth. Good to see you as always. >> Good to see you, too, David. Thanks for having me. >> I spoke to you about a month ago when um it was unclear what the Fed was going to do at the time. They were still data dependent. The Fed has kept rates unchanged uh this year and this move today was well telegraphed. Not a lot going on in the markets. The S&P is kind of flat on the day. The NASDAQ is kind of flat on the day. Gold is a bigger mover, down about 80 basis points, so it was at $3,700 yesterday. Now it's back down to below $3,700. Bitcoin's down close to 1%. So some movement, not a lot. So I'm guessing the markets didn't take anything pal said by surprise. The fact that he remains data dependent also I guess it's not a surprise. People were looking forward to what the Fed dot plots would reveal and what the projections would reveal. What do you what do you make of what happened today? How do you interpret the FOMC meeting? >> Yeah. So I listened into so so number one the 25 basis point cut was everyone knew that was coming. That was no big surprise. The Fed watch tool had priced it in over 90%. So, anytime it's 90% plus, I mean, that's a essentially as sure of a thing as we can get. But this is the kicker. He said that many members on the Fed board are against even two rate cuts in the remainder of the year. He said there was one Fed official that was for more than two rate cuts into year end. I think we can all surmise that might be the new Fed governor that Trump just appointed. But I thought it was very interesting. He seemed So, number one, when I was watching his commentary, he seemed very defeated. um he seemed very tired. Um I don't know if that's the stress from Trump or if that's the stress from just the job in general. It could be a combination. Um maybe even what's going on with Lisa Cook. But um but I did think that that was interesting. And then he did admit that at this point we're starting to see inflation pressures that are coming from tariffs. Um and we're also seeing a weakening labor market which is stagflation. And I just want to show this because while the markets have basically gone back to where we were prior, there is absolutely absolutely a big move intraday. So what we saw here is initially when the Fed, this is by the way the 10-minute S&P chart, SPY chart. Initially we popped, then we had a huge selloff and now we're coming all the way back. And I want to just show you what the US dollar did here. This is incredible. So the US dollar intraday had a huge drop initially when the markets initially popped. Then as the dollar rallied back up, the markets started to sell off and now that the dollar is coming back in, we're seeing the rally back in. So we're really seeing this inverse relationship again with the US dollar that has been very consistent. This is a lot of algo trading. I also think that the markets have rallied back because there's still this buy the dip mentality. investors and again, you know, I we have we have lots of feelers out there with people commenting on videos, but there was this general consensus among retailers that a Fed rate cut would be really good for the stock market as well. And so, they're getting that and there's more money flowing in. And then lastly, we got to take a look at the 10-year yield. The 10-year yield, holy cow, initially dropped to 3.99%, then shot up to 4.08% and is now pulling back. But again, even with the Fed rate cut, we're not seeing the 10-year yield really drop at this point significantly. So there, you know, yes, we're seeing the markets kind of flatten out to where they were prior, but I would argue that the underpinnings of what's going on is very, very interesting both with Jerome Powell's commentary and with the market reaction. >> A good question was asked by a reporter about the fundamentals of the economy. The question was uh we haven't seen a lot of the um inflation data reflect tariffs. Inflation has picked up but maybe not as fast as some people could. The question was uh does POW think that tariffs are being quote unquote eaten by the companies? In other words, just absorbed through the prices and uh not really passed through the CPI data and instead the effects of those tariffs are passed down to the labor market. In other words, tariffs causing more impact on the labor market negatively than more impact on inflation negatively. What do you think? >> I actually absolutely agree. I think um there's this kind of feeling amongst these companies that are getting, you know, the inflation pressures from the tariffs. They don't want to be viewed as raising prices because we all know that the president will tweet and kind of rip them and it'll be a very bad look. So, there's more of a case of well, let us eat at least a majority of these tariffs. But the problem is it affects the consumer regardless. Right? So it's either on one end where we're paying higher prices which is happening a little bit but not to the full extent or it's that these companies can't hire as much and they start laying people off and then it affects consumers on the layoff side where they can't then buy as much u as many products and goods and services because they've been laid off. So either way it's a detriment to the economy here. Uh we're just seeing which way it's coming through. Let's take a look at uh the Fed's projections of economic growth and we'll overlay that and compare that with your projections for economic growth. Gareth, this is uh median and central tendencies and ranges of economic projections changes in real GDP uh to hover around. So that's currently where we are uh projection slight improvement in growth over the next two years. There's the unemployment rate. The Fed is projecting uh basically little change throughout 2027 and then the PCE inflation. They are expecting inflation to come down towards a 2% target long run by 2027. Core PCE, same story. Let's just stop here and uh see if you agree or disagree with any of these projections based on your own research and anecdotal um evidence. >> Yeah. So, so the projections that I have anyways that I've done the number crunching on, it looks like inflation will continue to be in the short term up to to see upside. So, we're going to see probably in the next few PPI CPI numbers a little bit of an increase. But as the labor market weakens, and this is what happens generally during pre and into recessionary periods, what we start to see is that that it actually has a deflationary impact. And so the inflation that we're seeing from tariffs will eventually be offset by deflation of the consumer struggling more and more as the labor market and the economy weakens. And that will bring us down towards at least 3% maybe a little bit below 3%. The problem is is that a good reason to see inflation coming down, right? Is is that the reason we want to see inflation coming down? And then how does the labor market or how does the Federal Reserve react? Do they just start throwing more money at the system? Does the government increase spending? Does it then kickstart inflation? But I do think again inflation will slowly come back down, but not for good reasons, but for bad reasons, mainly the labor market and economy weakening. >> Before we continue with the video, let me tell you about a very important topic. How to protect your privacy. Now, your private information doesn't just live in the inbox of your phone. It's being collected, packaged, and stored, and tracked by data broker websites all over the internet, even without you knowing. That's where today's sponsor comes in. Delete Me. I use Delete Me to protect my privacy. And here's how. It helps you. It's a platform that helps you remove your personal data, like your name, address, and contact info from hundreds of these data broker websites. When you sign up, you'll get a detailed privacy report showing where your data was found and what's already been removed. And Delete Me keeps working throughout the year, scanning and clearing your information regularly. It's an easy way to take back control of your digital footprint without trying to track everything down yourself. Go to joindeelme.com/davidin and use the promo code davidin at checkout to get 20% off of US plans link down below or scan the QR code to get started today. Right. To what extent will the labor market weakened Gareth? Weaken weakening could be a slight tick up in initial claims or it could be, you know, a pandemic style sort of jump in unemployment to the double digits. Those are two extremes. Which end of the extreme is more likely for you? >> So, I do think I do think we're headed towards a recession. Um, you know, now listen, I thought that for the past year. Uh but it's it's been a matter of US government spending and the essentially so much liquidity, so much wealth effect from the stock market that in my opinion has kept us in this elongated kind of anti-recessionary period. But the let's be fair, the bottom 50% of this country at least are already in recession uh if not even you know more than 50% in a deeper recession. um anyone who's invested heavily in the stock market is doesn't mind the inflation and maybe they do mind but they're able to handle it and I think this is where we start to see these kind of this kind of variance where we're looking at a market where again there's two different different players right so again you're looking at people that are already in a recession versus the investing players that are not yet there but they will get there once the stock market starts to fall >> is it possible that we'll have some sort of labor market recession but not outright recession. Technically speaking, maybe growth chunks along in positive territory. Maybe real GDP is still positive, not very high. But then we get a slowdown in labor growth, more layoffs, unemployment rises. So technically speaking, real GDP is still positive, but everything else just just kind of slowing down. Would that still qualify as a recession in your books? >> Yeah, I think I think there is different ways to view a recession, right? Right? I mean, you look at the GDP aspect, that's one way of measurement. But again, the question is where does AI play into that? Where are these other factors in it? And if that's a very small portion of the population that's affected by AI and the growth of AI, like let's say let's say it's 20 or 10%. Just because that is an outsized period, does that mean that we're not in a recession because the other 80% is struggling? I would I would say again, we're going to have to redo our views of what a recession is. And and I think that will come become more and more apparent in the coming years. The other thing I want to mention here folks, this is really really interesting. So if we go to the charts here again, and I always love bringing up the charts for you guys, but if we look at the S&P 500, all right, so number one, the S&P 500 here is struggling inside of what we would call a wedge pattern. But one of the things that I've gone and done research on is that if you compare 2007, all right, look at this. Look at this chart here. Here's 2007, okay? Housing topped two and a half to two years prior to the stock market topping uh before the first rate cut. The first rate cut in 2007 was on September 18th. Today, granted, it's not the first. We had one a while back, but this is the first one where we're seeing the labor market weaken was on or is on September 17th. So again, interestingly enough, if you look at the data, when did housing top out here recently? It topped out about two to two and a half years ago. And so, you know, it's it's it's, you know, it's not it's not meaning that this is exactly how it's going to play out, but I think investors have to really take a close look at what comes before a recession. In this case, this was the financial crisis. And then you look at other factors like delinquencies on credit cards. And David, I know you see some of this data as well, but delinquencies of credit cards 90 days or beyond are now at 2008, 200 level, 2009 level highs. And so there's more and more, and we just talked about this with how do you predict or how do you say when you're really in a recession, there's more and more evidence that more and more of the public is struggling in a major way. And I would dare say that again it's eerie to see that on September 17th. Today we got that first rate cut going into a weaker labor market in 2007. It was on September 18th, 2007. And and again we saw the labor market weakening um 2 and 1/2 years prior or topping out 2 and a half years prior, which is what we've seen now. >> I'll give you a personal anecdote. I was just in Colorado last week. I got back over the weekend. I was taking an Uber on my way to the airport in Denver and the the the Uber driver was telling me how things have slowed down in for tourism in the city. I asked him how's business, you know, chitchat. He's like, "Well, typically in the past in past summers it was really busy and now it's just not so much. I don't know what people were going. I don't know if they're going somewhere else." And I said, "I I maybe it's nationwide cuz I was in Vegas a couple months ago in May and the same thing happened. It was relatively quiet for Vegas uh back in May when I was there. So actually people have been talking to about that on my show. The Vegas index kind of a leading indicator for discretionary spending. That's just things are slower everywhere. I wonder how you can trade that data because everywhere you go you kind of you see evidence of slowdown in tourism, discretionary spending, leisure, and hospitality, but at the same time markets are hitting all-time highs. Gold's hitting all-time highs. Bitcoin's hitting all-time highs. So, how do you how do you reconcile this seemingly big disparity um between the real economy's growth and the growth in real assets and financial assets? Yeah. And this is what happens every bull market at the very end is that you have a disconnect, right? And you could even say this disconnect is with gold. Gold and the S&P very rarely continue to make new all-time highs together for as long as we've seen recently. And that tells you something. Both of those will not continue to make new all-time highs. But going to this other factor is you're right, past bull markets just before they end, the data starts to weaken, but there's still this FOMO, this fear of missing out amongst retail investors. And what I look for in the data that tells me and puts me on alert is margin levels, right? We're now at all-time highs on margin, which is people borrowing money to get into the market. All right? We now have people investing in in meme craze again. We've seen stocks that that are now saying, "Oh, we bought some chain link or we bought some Ethereum and they go up 3,000% in a day." These are the same things that occur in every cycle. And it's a human psychology trait to where you feel like you're missing out. And at that point, you have to play catch-up. And by the way, hedge funds find this this the hard way, too. If into the end of the quarter, they are not performing like the rest or or as the market is, they have to just force money. They force money into the market and they try to play catch-up. And so this is something that is a is a human psychology trait, but it's also an indicator um of market tops. And so again, whether we're topping today or whether it's a week or a month away, that's hard to predict and I'm not a great predictor of that. But what I do know and I've been through 99 2000 2007 um you know through COVID all of these signals occurred just before even in 2021 we saw the same thing with Bitcoin with crypto and with memes like GameStop and AMC. And so again it's more of a breadcrumbs where it's dropping these breadcrumbs and then it's up to us as investors to start pulling the reins back and being a little bit more cautious. >> So here's the ultimate question especially after today's Fed meeting. What do you do? On the one hand, there's weakening economic data. Perhaps you're right. We're in the tail ends of a bull run. We'll see. Uh but what do you do with the fact that the Fed is now in an easing cycle? Now, the extent of their easing is debatable. Maybe they'll cut once, twice. Morgan Stanley said three times this year. Again, we'll see. But the Fed has shifted its stance from we're not ready to cut to now we're ready to cut. On the one hand, there's weakening economic data. there's a tail end of the bull rally. On the other hand, there's the argument you should not fight the Fed. So, what do you do as a trader then? >> Well, so the first thing is I always look at data and and and the first thing is to say, okay, in past periods where the Fed begins to cut rates after, you know, an expansionary period begins to slow down, what does the stock market do? And believe it or not, and this goes contrary to kind of the the narratives that have been spun out there on social media and even in mainstream media, when the Fed begins to cut rates, the markets actually start to fall. And so this is very interesting because essentially the markets are forward-looking, meaning that we're all buying stocks going into the cut because we're assuming that the cuts will be beneficial. But by the time you get to the actual cut, people have already bought in. They're all in the markets. And now there starts to be this fear of people saying, "Uh-oh, wait a minute. Is the Fed behind the curve?" And you're going to hear this more and more now in the coming days, is wait a minute, can the Fed not cut as much as they should because inflation is high. You know, these other Fed officials saying we don't even support two rate cuts into year end now, which is what the Fed funds tool is telling us. And so for us as investors, there are ways to protect ourselves. Number one, you can buy buy puts on the market with the VIX down below 15 or around 15. buying protection via options is very very cheap. It does cut into your gains though. There's no doubt about it as it as it all will. Um or you can just lighten up. There's no one's no one goes broke taking a profit and that's something I always tell people. So if you have a thousand shares of Nvidia long, what you could do is you take a quarter off the table or a half and let the other half run. Put a break even stop or a in the money trailing stop. There are lots of ways to protect yourselves. For me, I'm a little bit more aggressive. So I'm shorting the market into this. I'm looking to get that downside benefit. But again, if you're dead on being long, at least protect yourself. >> Are there assets that you think are natural hedges? Let's say you don't want to trade options, you're not advanced, or you don't want to sit all day and look at the screen or deal with options decay. Um, are there things that you can buy long that may be a hedge or a diversifier against equities? >> Yeah, I mean, I think something like the VXX as a short-term trading vehicle, it tracks the VIX, right? So if you have let's say a a full portfolio of longs, maybe you buy a little VIX which goes up if there's fear increases essentially if the market sells off. So there are ways to play it. There's enough ETF vehicles out there today to kind of hedge yourself. Um you could also just go more conservatively like I continue to think like a name like Fizer, you know, it doesn't it's not a sexy play. Um Dr. Pepper, this is another one. Kurig Dr. Pepper. um they pay good dividends and they're they're near their 52- week lows and and so you look at something and say, "Wow, these are trading at 12 or 13 forward PE ratios and they pay four to 7% dividend which protects me, right?" So if I'm in Fizer and it pays a 7% dividend, even if the stock falls 7%, I'm break even. Now, if the stock goes up and it pays a 7% dividend, maybe I make 15%. Right, over the course of a year. And so there are other ways. People just have to think outside the box and it's very hard to because then you feel like you're missing out, right? Oh my gosh, but I'm going to miss the next 3% or 5% in the next week or two on the stock market if it continues to rally. But I always say to people, remember, it's not about how much money you make, it's about how much money you don't lose. Let's take a look at some charts then and uh see what you're looking at for short-term, medium-term uh price action. Yeah, let's start with the S&P. Yeah, the S&P again, by the way, amazing trend line here. You can see on the S&P, this trend line, by the way, goes all the way back to October of 2023, connecting through that low, which was really the start of the bull market after the last bear. Then you have the low in August of 2024, which was that massive sell-off. And then what we saw is during liberation day, we saw the markets collapsing through that and now it has become resistance. Right? So, every time we're hitting that, hitting it again and again, and even here recently, we've hit it, but now starting to pull back just a little bit. We can throw another arrow up there. That's a level that as a technician I'm really watching. If we flip over to the QQQ, look at this. This is a parallel channel that gives us our low pivots going back to basically 2024 and multiple high pivots. And look at how the market behaves every time it hits it. And to me, this means the market has more risk of downside right now versus upside. Now, if we break through this level, okay, that's different. Now, you open up, it's blue sky again, and you could start to go higher. But I love looking at charts and not overthinking it. And I say to myself, all right, listen, if if we pulled back here, right, then what's the odds of us pulling back here? Especially when you go back and every time you're hitting this line, you're pulling back, right, over and over again. And so, I don't think overthink it. just let the chart tell us what the likely level is and then again keep a tight stop and if we break out you stop out take a small loss and off to the races the market can go again. >> Are you going to compare this cycle to the last time the Fed eased in 2021? Um in other words is this the beginning of a bull run? Um that uh I know we talked about this being the end of a bull run, but could we see this sustaining for quite some time is my question. I didn't phrase that properly. >> Yeah. Well, I I think again the last time the Fed started to really ease, you know, we were coming obviously out of COVID. Um there was there was some craziness going on there. The markets obviously were kind of in a different state. So I'm not a big fan of using I almost look at that as an outlier impact because of how uh what we were coming out of. Right. So again, you had that massive sell in in 2020 and then this rip roaring move. And you're right, the Fed was kind of worried. Oh my goodness, we need to save the economy. we need to save the world. Much different now. Much different now. In fact, what we're seeing now, by the way. And then housing prices were just going straight up at that during that period versus now we're seeing the housing market unbelievably weak. In fact, I have realtors in the South that are telling me it is so bad in places like Florida that it's as bad as 2008 in the real estate market. And that's really scary because remember, people's biggest asset is their home. And so if all of a sudden your house which was valued on Zillow, let's say at 600,000 is now 500,000, what does that do to your mentality about consumer spending, are you still spending as much versus when your house was going up 100k a year? My guess is you're starting to pull back on spending. >> Well, you're right. There's actually studies done on this. When your net worth declines, even if your cash flow stays the same, uh your spending pattern changes. Uh so Okay. I I just just on that note, why do you think h home prices are moving the way they are? I mean, mortgage rates aren't changing right now. So, what's going on? >> So, with housing, it's it's the biggest issue is the underlying costs of owning a home. They have skyrocketed. And I can vouch for this. I'm a homeowner and it is beyond ridiculous. So, obviously, interest rates going up have made it much more costly. We all got very used to low 3% 30-year mortgages a few years ago. Now it's obviously 6% was 7%. That's a huge difference in a monthly payment. In addition, home prices or values have gone up. So, you know, you're buying a house that used to be 300,000. Now you're paying 600 for that and the interest rates are double of what they were a few years ago. And then lastly, this is the biggest one is that once you own that home, the cost of home insurance, the cost of of you know, everything else to do with the house, even fixing things in the house, has skyrocketed with inflation. And that really makes home ownership even more expensive. And people are done with it. Heck, I'm done with it. I mean, this it's ridiculous at this stage um to have to pay so much. I mean, we're told and we're bred to believe that owning a home is your your avenue towards like financial independence and wealth. In reality, it's starting to suck people dry. And I think that's one of the big issues. Okay, now let's take a look at Bitcoin. Bitcoin is moving in lock step once again uh with the stock market down a little bit more. It's just oscillating between 115 116. Yeah. Let's take a look at this chart and um do you see it going above 120 by the end of the year? Where do you think there's more downside? Well, I'm going to show you a trend line that is going to make the determination of whether or not this thing goes to new all-time highs into year end or if it drops to 100 or sub 100,000. And to find this trend line, it's amazing. I just found this today and I love this is why I love trading with charts is because you find things that just are remarkable. What I did here is I took the high from 2017 on the regular chart. So not logarithmic, just regular chart. Take that and connect it through the highs of 2021. Okay? So we're basically connecting it from the high of just before the bare market in 2017, the all-time high then to the all-time highs in 2021 and stretch that trend line out. And what you'll notice is in late 2024, okay, in late 2024, we hit that exact line again and again in early 2025. And then briefly, we got above it and made a new all-time high. And then we came back below. Then we got above it and made a new all-time high and then came below it. And then look, it's struggling here at this line. So what the chart is telling me is this is that this trend line, number one, it was major in 2017, 2021, 2024, and 2025. But if we can get back above the orange trend line, then the odds are just like over here. We got above it, we made a new all-time high. We got back above new all-time high. Then chances are we're going to make a new all-time high. If we can't, then watch out below because every time if you go back here, right right here, even in 2025 January, 30 plus% correction. You go back to 20 2021, we had the the 65K down to 30K, then the 69 down to 17K and even in 2017, 20,000 and we bottomed out around 3500. And so the point being is that if if Bitcoin cannot get through this level, it's an omen on the charts here that we're going to get a bigger correction at least below 100,000. How much lower is tough to know, but again, I watch this level. It's at 117,000. So if we get above 117,000 and hold there, I think you're going to 126, maybe 130, maybe even 150. But if we can't get above it, you're looking at sub 100,000. >> There was research done by institutional investors Fidelity. Uh I read recently that says that Bitcoin's volatility profile is now on a 12 month or 24-month rolling basis. I can't remember the time period they use, but it's now lower than tech stocks overall. meaning Bitcoin as an asset class is no longer super volatile. It's on par, if not more stable on a riskadjusted basis than some tech stocks. Now, I want to get your opinion on this. If that were the case, uh should we start making the assumption that perhaps this time if it were to decline, it won't go down 50 70%. It'll go down maybe 20 30% in a given cycle and up the same way as well. Both up and down. >> I would 100% agree with that. The more institutional money gets involved, the more people view it as the dream, which is at least for me. I can't speak for everyone, but I've always viewed Bitcoin as the digital gold. Stated 21 million run, that's it. Therefore, it has that value, the scarcity aspect to it. And so, really, as more players get involved, the volatility should drop. And we're even seeing that, right? I mean, if you look at the drop we saw in 2017, then 2021, and then the last time we hit this trend line, we only saw a 30% or change correction. And so it makes a lot of sense that if we did fall, it probably only declines in that 30% range uh from those highs. And I think that makes a lot of sense and I do think that's what what will happen. So I think again it's adoption as that digital gold. It slowly is trading more and more like a gold type type asset and I think that's a very healthy thing for Bitcoin in the long term. >> Do you think gold and Bitcoin will stay correlated? They have been this year but then again gold, Bitcoin stocks have all been correlated this year. The last time we saw this happen, it was 2022 when they all went down together and before that 2020. This is interesting. >> Yeah, I I think for the most part they will. I do think for short periods of time where you see major stock market selling, then pan panic will probably bleed into Bitcoin a little bit more. But in all fairness, in 2020, gold sold off initially too before roaring back. Um, so they all sold off together because fear beates begets fear. Um, but I do think overall they'll become closer and closer in terms of correlation. uh eventually until they could trade, you know, up days up days exactly and down days exactly down days. But again, that's that's years down the line where they become really really correlated even more so. Do you think uh let's talk about gold now. Gold at $3,600. Oh, it's back up to $3,700. It's moving so fast. It was below $3,700 a couple minutes ago. Now it's back up. Okay, so gold at $3,700. Unprecedented levels. Uh banks are now projecting 4,000. I think Goldman Sachs is projecting 4,000. And this is interesting. actually I'm I'll pull up this report for you. Goldman Sachs is projecting $5,000 gold if the Federal Reserve loses independence. I'm going to find this um report. Gold Yeah. Uh gold could hit $5,000 if the Fed is uh Fed's independence is somewhat compromised and they uh and they have to look are forced to lower rates. Here we go. Goldman Sachs $5,000. Um, in a major analysis released this week, the investment bank outlined scenarios where gold may reach $5,000. Uh, investors feel that the politicized Fed would slash rates to reduce up the economy. Short-term stoking inflation fears down the road. Goldman's analysts are quite direct about the implications. A scenario where Fed independence is damaged would likely lead to higher inflation, lower stock and long dated bond prices, and an erosion of the dollar's reserve currency status. In contrast, gold is a store of value that doesn't rely on institutional trust. Let's just talk about this for a minute. One of the issues brought up today at the press conference. It was asked once, I think maybe more than once, I can't remember, but it was asked near the beginning, what does uh Chair Jerome Powell make of the recent uh meddlings, shall we say, of the White House with the Federal Reserve? How does Jerome Powell view the Federal Reserve's independence currently? And all Pal said was, "We continue to be committed to independence." That's all I'm going to say for now. All right, let let I'll let you evaluate whether or not their independence is going to be damaged and whether or not this assumption by Goldman Sachs is logical whereby if they have further damage where they lose their independence, what happens to inflation? What happens to rates? What happens to assets? Yeah. So, this is the kicker, right? Is that we're already seeing the erosion of their independence? And again, it's it's a slow virus that is eating away or a bacteria that's eating away at the Federal Reserve. But anytime you have the president of the United States, arguably the most powerful man in the world, attacking the Federal Reserve so openly on social media, it's going to make other countries think twice, right? So, you know, that's one of the things is we are very reliant as a country on other countries buying our debt, right? We need them to finance our expenditures uh which now are massive. In fact, you know, 1 trillion just in interest payments per year. And so this is only going to make interest rates on the long end of the curve go up. Now, listen, the Fed can keep the the short end controlled because that's what they control, but they can't control the long end. And ultimately, that is going to be the issue. I want to show you something here on my charts that really has me concerned. So, we're going to look at the DXY. The DXY on this chart has shown us that it has broken major support that goes back to 2022. Look at how the chart kept bouncing off the Dixie, the DXY 10. >> Sorry, Gary, can you can you pull up your chart one more time? But yeah, uh you're right. The DXY has taken a huge hit 20225. Let's see what happens next. So, so yes. So, with the dollar here, and this is so concerning to me, is that the dollar was holding above this 101.5 to about 100 level on the Dixie for multiple years. Recently, as we saw the attacks on Jerome Powell start to take hold and the liberation day tariffs begin to take hold, the dollar broke that support, tried to get back above here, failed, tried again, and is now breaking to the downside. We're getting a bounce today on the back of the Federal Reserve commentary. But this is the issue is that the dollar is now attacking a support zone that goes back to the lows of 2008. A trend line or trend line zone that goes back to 2008. Now, mind you, this is important because this was when the financial crisis began. The dollar began to gain relative strength against a basket of currencies. If you break this zone, basically anywhere between 96 to 94 on the Dixie, the DXY, you likely are headed back to the7s, basically 71 on the DXY. And you can't blame other countries, right? Other countries are looking at the US dollar as their reserve currency and they are beholden to the US. They basically have to bow to the US in many situations. And so it's now between tariffs and what the president has done, it's starting to make these other countries say, "Wait a minute, you know, do we want to let the US have this much control over us or do we need to diversify away from dollars and buying US debt so that we are not so beholden to any of their whims?" And that's what's happening. Absolutely. Poland recently said 30% of their reserves would be gold. Now we've seen Bitcoin starting to peak into reserves of countries. Countries are now selling dollars and reducing their exposure. Now listen, the dollar, we're not going to see the dollar collapse. Reserve currencies historically don't just collapse out of thin air. But is it the beginning of a longer trend now of the dollar slowly losing that reserve status? I do believe it is. And if we break 96 to 94 on the Dixie, the DXY, that is the catalyst to further downside and significant downside. >> Right. What happens to markets when the dollar slides? Is that positive or negative usually for stocks and risk assets? >> So in general it's it's positive. Um it's positive as long as there's not associated fear. So for instance during the liberation day period when the dollar was declining there was fear in the markets because of what was causing it and the markets fell. As long as it's a slow slow grind lower investors are happy with it. Gold generally will go up. Bitcoin generally will go up. Risk assets will go up. But if you get in a situation where people start panicking over the dollar decline, then forget about it. Stocks literally could crash. >> Well, let's keep tabs on that scenario. Will stocks crash by the end of the year? Generally speaking, which assets are you long right now, especially following the first rate cut in a while? And which assets are you either on the sidelines of or about to short? >> Yeah. So, so I'm long volatility right now. Volatility has gotten way too low. So, I'm long VXX right now. I'm just looking over at my portfolio here as again um I'm watching what it's doing but ultimately long volatility uh generally short tech up here um technology I'm long Russell Russell IWM type stuff we've seen as interest rates come down the Russell is the one lagard I think there's upside there I was long China in fact I think we talked about this in my last interview about a month ago saying that China is one of those places that should get some good money flow and we saw BU go up 50% Alibaba go up. I mean, incredible rallies in those that they've already run. I think you step back from them. I like the EWZ, which is the Brazil ETF. Essentially, look for money as the dollar erodess and confidence in the US system erodess. Look for other areas to put money. The only places I'm long in the US are defensive names like a Fizer, I mentioned, Dr. Pepper Purig. Uh these names that again pay a dividend and are still cheap relative to their valuation metrics. >> Okay, good. Uh, any other trades you're making right now that may be independent of the Fed? Pun intended. >> Oh my goodness. Yeah, I wish there was something that was independent of the Fed. So, as of now, not really. Um, I'm certainly not buying gold up here. I will buy on pullbacks if we get a good strong pullback. Silver I continue to like, but same thing. It's just had too much of a run. Um but again essentially if you're looking at years out metals eventually Bitcoin once it pulls back I want to really start loading up again on that as again you just have to look at the writing on the wall. You know there was this big push with the Doge type thing to cut spending. I don't even know if anyone remembers that anymore. Didn't happen. I mean yeah there were a few cuts here and then it kind of went away right and then this big spending bill came out. And and I'm not saying this in terms of Republicans or Democrats. They're all the same. They just they want to stay in power so they got to spend money to stimulate the growth. But the problem is we all pay the price of that. Right. >> Final question. This uh we haven't discussed this yet. So uh Steven Moran who was just recently appointed um uh governor on the Fed. He dissented today. He called for a half point cut when they only got 25 basis point cut. Now Jerome Pal did say that it was not widely uh discussed that there would be a 50 basis point cut. I don't know if that's a play on words, but clearly it was discussed because one governor at least dissented. And so the question is whether or not the markets will see this descent as one of two things. Either impetus for more liquidity because at this point there's going to be more dissension, more pressure to cut by not just 25 but 50 basis points again or that there's just fragmentation amongst the Fed. and generally speaking, noise and market volatility that we should ignore. What do you make of this story? >> So, this is a direct nod to his boss who just appointed him, right? Um, you know, this was probably a prerequisite to make sure that he voiced a 50 basis point cut. Um, to me, it eats more away at the Fed independence. I mean, when you're talking about a 50 basis point cut, when you have CPI coming in at 04%, multiply that out by 12, you're at 3 to four, maybe even above four in terms of consumer price inflation, you know, whatever happened to, you know, point 2% inflation. And so this is this is my concern is that the erosion I of the Federal Reserve and this is just another kind of proof in the pudding if you will is going to eat away at the long-term prospects for the US as as we slowly fade away from being this grandio superpower that controlled everything. So again, you know, and that's the market. I don't know if you guys heard that. That's the stock market closing right there. But the point being is that the other Fed officials said two or less and you had one saying two or more who was that. I didn't even need to know the person. I could have told you even before you brought it up. It was pretty obvious who it was going to be. >> For sure. Gareth, thank you so much for your update. We'll leave it here. Where can we follow you um and uh learn more from you? >> Uh verified investing, all charts and data. No hype, no nonsense. It is what it is. The charts tell us the future with a high probability. Not perfect by any stretch, but if you're interested in learning about charts and learning how to read charts, verified.com is the place. >> Excellent. Thank you very much, Gareth. We'll put the links down below. Follow Gareth there. Appreciate it. We'll speak again soon. Take care. >> Thank you. >> Thank you for watching. Don't forget to like and subscribe.