Top Market Plays for Fall
322: Gold, Chinese Stocks, Marburg Virus
Good morning — lots happening in markets amid the backdrop of escalating geopolitical turmoil. Gold is soaring to all time highs, the Chinese market is absolutely ripping, and crypto continues to range as traders wait for the next big move.
During a speech at the National Association for Business Economics conference in Nashville, Federal Reserve Chair Jerome Powell expressed "growing confidence" that inflation is moving toward the central bank's 2% target. Powell mentioned that if the economy continues to perform as anticipated, two more rate cuts could be on the table, though they are likely to be less aggressive compared to the half-percent cut made by the Fed two weeks prior.
He stated:
"The measures we're taking now are really due to the fact that our stance is due to be recalibrated but at a time when the economy is in solid condition. We're recalibrating policy to maintain strength in the economy, not because of weakness in the economy."
The labour market is another conversation — the September jobs report comes out tomorrow and is expected to be largely flat. The October jobs report set to be released November 1st ahead of the election may be a different story reflecting the Hurricane damage, the Boeing strike, and the new Longshoremen strike that began this week.
Investors still appear to be highly optimistic, pushing the US stock market further into new all time highs. The S&P 500 has already reached 43 record highs in 2024. The most recent peak on Monday brought the index up by 20.8% for the year, marking the best start since 1997, when the US economy was booming during the dotcom era under President Bill Clinton, according to FactSet (CNN).
In my opinion gold is going to continue to go up, as is silver. Goldman Sachs has raised their 2025 forecast on Gold to $2,900/oz. Societe Generale has shifted 100% of its commodity allocation to gold, driven by geopolitical risks and a weakening broader commodity market (cryptoglobe). Copper is also showing signs of more gains. We are entering a period of stagflation in which the Fed will likely eat it’s hat into the end of the year and 2025 when inflation rears it’s head again and the labor market worsens.
As Sven Henrich pointed out on X we are taking on $373B in new debt in 4 days. This is an entirely unsustainable backdrop.
Add on top of that the growing risk of an escalatory event in the Middle East or Europe along with election unrest in the US and you have a very uncertain stage for equities. Commodities like Oil, Gold, and Silver will likely continue to do well along with several of the sectors highlighted in our Hedging for a Kamala Presidency post from weeks ago (utilities, industrials, energy).
The dollar is getting devalued at record rates — and individuals are going to have to figure out new ways to preserve their purchasing power and make sure they can get by as macro volatility continues to increase.
Chinese Opportunity
After nearly a 30% rise from September lows, Chinese stocks paused their heated rally on Thursday. Shares of major e-commerce companies BABA 0.00%↑ and JD 0.00%↑ declined. Electric vehicle manufacturers NIO 0.00%↑ and $BYDDF dropped as well.
I don’t think ALL of the steam is gone from this Chinese rally — of course in hindsight there was plenty of opportunity to pick many of these names up on the cheap in the last 6 months or so. Best move here might be to go with top names like BABA or just start an allocation to indices. The Chinese stimulus narrative is interesting when paired with rate cuts in the US — this could indicate a short to mid term rally that persists despite weakening labour markets and geopolitical turmoil.
Getting a lot of questions on how I am positioned right now, so just going to list it all out for folks to see. Keep in mind this is MY preferred allocation and it excludes 401K or other longer term retirement accounts.
Below you can see 90% of the positions I have right now in crypto and equities: