The GDP PCE ADP Waltz

August 29, 2023

Mish's Daily

By Mish Schneider

Conference Board Economic Forecast:

Looking into 2024, we expect the volatility that dominated the US economy over the pandemic period to diminish. In the second half of 2024, we forecast that overall growth will return to more stable pre-pandemic rates, inflation will drift closer to 2 percent, and the Fed will lower rates to near 4 percent. However, due to an aging labor force we expect tightness in the labor market to remain an ongoing challenge for the foreseeable future.

Yesterday, we had this to say about Bonds:

“The good news is the market has absorbed the bond’s performance. A better risk-on environment is when the SPY outperforms the long bonds.

“Talking technical, we are watching the October 2022 lows carefully. A potential double bottom exists if TLTs can clear back able 98. A move under 95 though, points more to a retest and possible break of the low 91.85.”

The whole market rallied, from bonds to small caps to metals and oil.

Clearly, the economic statistics coming at us with blinding speed, more of a can-can than a waltz, has begun.

Can everything move up together or will the rally today resolve lower for some instruments while higher for others?

The relief rally in bonds coupled with the dollar reversing closer weaker, helped everything run higher.

If you watch the clip from The Final Bar that Mish guest hosted alongside Keith, we showed you how this rally could happen especially with volatility look like anything but volatility.

In the spirit of the forecasts, the expectation for 2024 remains for lower inflation, no recession, steady growth and a Fed that will begin to ease up on rates.

Sounds amazing right?

Enter the Dragon.

Silver is in a bullish phase.

It is also outperforming the gold market using the ETFs SLV and GLD.

Furthermore, on the leadership indicator, silver is nowhere near overbought relative to gold.

The gold-silver ratio has fallen below the 80 level, suggesting that the silver will outperform gold prices going ahead.

2 reasons why are stimulus measures in China and robust industrial demand as the U.S. looks to spend $45 million to develop domestic manufacturing with the solar power sector.

Historically, silver often outperformed gold during periods of strong economic expansion and tended to underperform gold during periods of economic stress.

With inflation persistent, we will continue to watch bonds and the gold to silver ratio. Plus, we are still focused on small caps and IWM clearing 190.

In the meantime, you all have a wonderful rest of the week and long weekend.

Mish is taking a few days off and will return September 5^th.

Happy Labor Day weekend!

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