Gold Price Trends: Simple Analysis and Investment Tips

Economic

Summary:

Discover the latest trends in gold prices with an easy-to-understand analysis. Learn about gold's short-term price outlook, investment options, and the growing demand for gold in green technology.

Gold has always been a go-to investment in times of uncertainty. Lately, the price of gold has been climbing, catching the attention of many investors. In this article, we'll explore what's driving this uptrend, break down some short-term technical analysis, and look at where gold prices might be headed in the near future. We'll also discuss the various ways you can invest in gold and introduce a unique perspective on the gold market.

The Upward Trend in Gold Prices

Recently, gold has been on an upward trajectory. This rise can be attributed to a mix of factors, including global economic uncertainty, inflation concerns, and the actions of central banks. When people start to worry about the economy, they often turn to gold as a safe haven. As of now, gold is trading around $1,950 per ounce, up from about $1,800 earlier this year. This increase reflects growing concerns over inflation and the potential for economic downturns.

Short-Term Technical Analysis

Looking at gold's price movement over the short term, we can see some interesting patterns. Gold has been pushing towards the $2,000 per ounce mark, a key resistance level. If it manages to break through this level, we could see prices move even higher, potentially reaching $2,100 or more.

However, gold's price isn't just going to go up in a straight line. There could be some pullbacks along the way, especially if there’s a shift in the broader market sentiment or if central banks, like the Federal Reserve, decide to raise interest rates. Key support levels to watch would be around $1,900 and $1,850 per ounce—these are price points where gold has found stability before, and they could provide good buying opportunities if prices dip.

Predicting Future Price Movements

Looking ahead, the future for gold looks bright, especially if economic uncertainty continues. Many analysts believe that if inflation keeps rising and central banks remain cautious about raising interest rates, gold could continue its upward trend. Some projections even suggest that gold could reach $2,200 per ounce by the end of the year.

That said, it's important to be aware that gold's price can be volatile. If central banks start raising interest rates more aggressively to combat inflation, it could put some downward pressure on gold. But if inflation gets out of control, gold might see another surge as investors seek to protect their wealth.

How to Invest in Gold

If you’re thinking about investing in gold, there are several ways to do it:

Physical Gold: You can buy gold coins, bars, or even jewelry. The price of physical gold is closely tied to the spot price, but you’ll pay a bit more for minting and distribution. For example, a 1-ounce gold coin might cost you slightly above the current spot price due to these premiums.

Gold ETFs: Exchange-Traded Funds (ETFs) like SPDR Gold Shares (GLD) allow you to invest in gold without physically owning it. These funds track the price of gold, making it easy to buy and sell shares just like a stock.

Gold Mining Stocks: Investing in companies that mine gold is another option. These stocks tend to rise when gold prices go up. However, they also come with additional risks related to the mining industry itself.

Gold Futures and Options: For more experienced investors, gold futures and options offer a way to speculate on the future price of gold. These can be more complex and carry higher risk but can also offer significant rewards.

A Unique Perspective: Gold's Role in the Green Revolution

One interesting angle to consider is the role of gold in the green technology revolution. As the world shifts towards renewable energy and electric vehicles, the demand for gold in technology—particularly in electronics and clean energy—could increase. Gold is a key component in many high-tech devices, including those used in solar panels and electric vehicles. This rising demand from the tech sector could provide additional support for gold prices in the future, beyond its traditional role as a safe-haven asset.

Conclusion

Gold's recent price trends show that it remains a valuable asset, especially during uncertain times. While short-term price fluctuations are always possible, the overall outlook for gold seems positive, supported by both traditional factors like economic uncertainty and emerging ones like technological demand. Whether you’re new to investing or looking to diversify your portfolio, gold offers a range of opportunities to consider.

As we move forward, keeping an eye on both market trends and broader economic indicators will be crucial for understanding where gold prices might go next. Whether you're investing in physical gold, ETFs, or mining stocks, it's clear that gold is still shining bright on the investment horizon.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

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Glendon

Economic

In recent years, cryptocurrency ETFs (Exchange-Traded Funds) have become a popular way for investors to get involved in digital assets like Bitcoin and Ethereum without needing to own the actual cryptocurrencies. These ETFs have seen a lot of money move in and out, which has affected the prices of the cryptocurrencies they’re tied to.

Fund Flows and Market Performance

The world of cryptocurrency ETFs, especially those focused on Bitcoin and Ethereum, has seen its ups and downs, reflecting how investors feel about the market. Grayscale is one of the big names in this space, with its Grayscale Bitcoin Trust (GBTC) and Grayscale Ethereum Trust (ETHE) leading the pack. These funds have attracted a lot of investment, but they’ve also seen some big withdrawals, particularly when the market has been shaky.

For example, in the first half of 2024, Grayscale's Bitcoin Trust saw investors pull out about $1.2 billion. This was a huge change from the $600 million that flowed in during the same time in 2023. The withdrawals were largely due to fears of tighter regulations and a general market downturn that caused Bitcoin prices to drop by over 20%. On the flip side, ETFs focused on Ethereum, like the Grayscale Ethereum Trust, saw around $400 million in new investments during the same period. This was fueled by excitement over Ethereum's switch to a proof-of-stake system and the growing use of Ethereum in decentralized finance (DeFi).

Overall, the performance of cryptocurrency ETFs has been mixed. Bitcoin ETFs have generally struggled, with an average drop of 18% in the first half of 2024, while Ethereum ETFs managed to gain about 7%.

Market Trends and Their Impact

The way money moves in and out of ETFs can tell us a lot about market trends. When there’s a lot of money flowing into an ETF, it usually means investors are feeling confident and expecting prices to rise. On the other hand, when money is flowing out, it can indicate that investors are nervous or looking to take profits.

In the first half of 2024, a clear trend emerged: investors started shifting their money from Bitcoin-focused ETFs to those centered around Ethereum and other altcoins. The numbers back this up—Ethereum ETFs saw a 15% increase in assets under management, while Bitcoin ETFs saw a 12% decrease during this time.

This shift had a noticeable effect on cryptocurrency prices. The $400 million that flowed into Ethereum ETFs helped push ETH prices up by 10%, while the $1.2 billion that was pulled out of Bitcoin ETFs contributed to a 15% drop in BTC prices.

A New Perspective: The Growing Influence of Institutional Investors

One thing that’s becoming increasingly important is the role of big financial institutions in shaping ETF fund flows and market performance. Companies like BlackRock and Fidelity are starting to get more involved in the crypto ETF market, bringing with them a different type of investor—one who is generally more cautious and focused on long-term gains rather than quick profits.

This influx of institutional money is already starting to change the game. For instance, in the second quarter of 2024, BlackRock’s newly launched Bitcoin ETF attracted $250 million right off the bat, even though most Bitcoin ETFs were seeing outflows. This suggests that institutional investors might not be as swayed by short-term market swings and are more interested in the long-term potential of cryptocurrencies.

As more institutions jump on board, the market could become more stable, with steadier inflows that help to smooth out some of the wild volatility that has characterized crypto markets in the past.

Conclusion

The world of cryptocurrency ETFs is changing fast, with fund flows and market performance closely tied to how investors feel and the growing involvement of big financial institutions. As these ETFs continue to draw interest, the way money moves in and out will be crucial for understanding price movements in cryptocurrencies. Knowing these trends, especially the shift from Bitcoin to Ethereum-focused products, is key for anyone looking to navigate this complex and rapidly evolving market. And with more institutions coming into the fold, we could see a more stable and resilient market for cryptocurrency ETFs in the future.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Kevin Du

Commodity

Government data on Monday indicated enormous U.S. corn and soybean harvests are on deck, but will those estimates only grow larger, or are they the highest that will be seen this season?

It is often said that big crops tend to get bigger, but the burden of proof can be heavier when the original numbers are already lofty.

The U.S. Department of Agriculture placed 2024 U.S. corn yield at 183.1 bushels per acre and soybeans at 53.2 bpa, both above pre-report trade estimates of 182.1 and 52.5, respectively.

Those analyst guesses were already safely above USDA's 2024 trendline yields of 181 and 52 bpa, and Monday's figures, derived through producer surveys and satellite imagery, would be new records.

The August yield estimates in recent years tend to be too aggressive versus the final, albeit with caveats, and the pattern is a bit more consistent for soybeans than corn.

August soybean yield has been higher than the final in six of the last seven years (not 2021), though 2021's yield was the highest of that group and close to record.

August corn yield has been higher than the final in six of the last nine years (not 2023, 2021 or 2017), but those three years are also the highest-yielding of the bunch.

Those statistics may seem to favor Monday's numbers going even higher, but it is interesting to note that the August yields for both corn and soy in 2021 and 2023 were below trade estimates, unlike in 2024.

Additionally, the August estimates in those two years were lower than in July, again, unlike 2024.

Finishing weather could guide the direction of the 2024 estimates, and although August rainfall is still uncertain, the lack of yield-clipping heat might offset any future downgrades, especially in corn.

Acreage Shift

Planted and harvested area were also factors in the U.S. production estimates on Monday, and the final harvested area tends to be lower than in late summer/fall.

This year was the first time USDA's late summer/fall area adjustment occurred in August, which is now permanent, though it took place in September or October in previous years.

Corn plantings fell by 727,000 acres from the June estimate to 90.75 million acres, though soybeans jumped by an unusual 1 million acres to 87.1 million. Both were expected to decline.

If the soybean area stands, it would be the third time in the last 16 years that final plantings were materially higher than in June. It would also be the first time since 2008 that final soy plantings were higher than in June following an acreage decline between the March and June surveys.

The easing in corn plantings was bigger than expected, especially given the relatively strong increase from March to June. These trends suggest the market and perhaps producers have been overestimating the attractiveness of corn versus soybeans this year.

Harvested area estimates also fell by similar degrees as the plantings on Monday, and those tend to be smaller in the end. Final harvested corn and soybean acres were lower than the autumn adjustments in eight of the last 10 years (not 2014 and 2015 for corn; not 2017 and 2020 for soybeans).

Huge Records

Some of the numbers published on Monday were eye-popping, most notably a 225 bpa yield for Illinois corn, a record by 11 bpa. Iowa at 209 bpa would best its corn yield record by 5 bpa, though these are not as heavy as it seems.

Illinois in 2014 set a record corn yield of 200 bpa, some 20 bpa above the prior high, and 2004's record of 180 was 16 bpa above the prior max.

Iowa set back-to-back corn yield records in 2015 and 2016 at 192 and 203 bpa, respectively, and each year represented an increase of 11 bpa over the previous high.

It is unclear where the technological yield ceiling lies, or if it exists, though pegging trend yield increases has recently challenged analysts due to the string of weather interruptions observed in the past several years.

Source: Reuters

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Thomas

Economic

Economists say "there are always opportunity in danger", stressing that this is the necessary approach which helps Vietnam continue economic reform in a more substantial way.

This is the driving force for the Ministry of Industry and Trade (MOIT) to implement the commitment that it will research and analyze the US Department of Commerce's (DOC) report about Vietnam's economy, to supplement and complete arguments before submitting dossiers to DOC on granting market economy status, a step to concretize the Vietnam-US comprehensive strategic partnership.

After doi moi (renovation), Vietnam has been consistent in carrying out a reform to turn the single-sectoral economy into multi-sectoral economy. The economy has been liberated from the state's strict and rigid control, while people have freedom to trade and do business. In addition, Vietnam has signed 16 new-generation FTAs (free trade agreements), becoming one of the most open economies in the world.

Thanks to economic reform, Vietnam has become an example in hunger elimination and poverty reduction, with the hunger and poverty rate falling from nearly 60 percent in early 1990s to 3 percent now. Private domestic invested enterprises with official registrations have been growing steadfastly.

Vietnam has finished the underdevelopment period, becoming an average income country with a dynamic market economy which is integrating deeply into the global economy.

There is no doubt that the reforms and considerable progress in recent years are why 73 economies have recognized Vietnam as a market economy.

Economic Freedom of the World Index by Canadian Frazer Institute released late last year showed that Vietnam ranked 106th among 165 countries and territories. The position represented a four-grade promotion compared with the year before, a relatively big improvement compared with other regional countries.

Singapore, for example, ranked first in Southeast Asia, or one grade up, while Malaysia ranked 56th, 3 grades down, Thailand ranked 64th (+ 8), the Philippines 70th (- 3), Indonesia 74th (+ 1), Cambodia 78th (- 3) and Laos 107th (+ 1).

Vietnam scored well in four major components of the economic freedom index, including the government scale (83rd), legal system and asset rights (77th), good currency (128th), international trade freedom (98th). Meanwhile, it was ranked 103rd in terms of regulations on credit, labor and business

Spaces for reform

After 40 years of doi moi, Vietnam's economy is still undergoing the transition with some shortcomings as follows:

First, the pricing mechanism of some products, such as petroleum, electricity, airfare and healthcare services still bears administrative intervention. However, to some extent, the intervention has benefited foreign invested enterprises (FIEs) as well, not only Vietnamese enterprises.

The electricity prices in Vietnam are believed the lowest in the world and this also brings benefits to FIEs, though the pricing scheme has not encouraged investment in the power sector and has hindered the effective operation of the electricity market.

Second, the protection of ownership and property rights still cannot be carried out thoroughly. In some places, land is recovered by the state at non-market prices.

Third, the state-owned economic sector still accounts for a large proportion of the national economy. Reports show that State owned enterprises (SOE) provide 87 percent of electricity output, account for 84 percent of petroleum retail market share, and provide 100 percent of raw gas and 70 percent of LNG market share, and 70 percent of fertilizer. SOEs (state-owned enterprises) are also dominating in the fields of telecommunications, transport, finance and banking.

Economists point out that only the goods market is regulated under the market mechanism, which observes the law of value, thereby ensuring the smooth circulation of goods. Meanwhile, the other markets, including energy, land, manpower and capital, are still influenced by administrative commands.

A report of the World Bank shows that the state still participates in many economic activities through SOEs, while the land and capital allocation bear the impact of administrative commands rather than market conditions.

The 9th Party Congress organized in 2001 adopted the concept of "socialist-oriented market economy" to describe Vietnam's economic system, which was later legalized in the 2013 Constitution.

According to the World Bank, the main viewpoint on Vietnam's socio-economic development is building a socialist-oriented market economy, with importance attached to harmony between market-based economic growth and social equity.

Source: Vietnam Net

To stay updated on all economic events of today, please check out our Economic calendar

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FastBull Featured

Daily News

[Quick Facts]

1. Israeli military on high alert for potential imminent attack by Iran.

2. Ukraine claims to control 1,000 sq kms of Russian territory.

3. Japan's producer inflation quickens as energy costs surge.

4. WTI tops $80 per barrel and an Iranian attack may boost it higher.

5. NY Fed: U.S. medium-term inflation expectations drop to a new low.

6. OPEC+ oil production exceeds the target in July.

[News Details]

Israeli military on high alert for potential imminent attack by Iran

The Israeli military is 'closely monitoring developments in the region, particularly the movements of Hezbollah in Lebanon and Iran, Israel Defense Forces Spokesperson Daniel Hagari stated on the evening of August 12th local time. The Israeli military is currently 'fully prepared at the highest level for both offensive and defensive operations in response to potential attacks. Hagari mentioned that the Israeli Air Force has intensified patrols over Lebanese airspace to detect and intercept potential threats. He also noted that there was no change to the Home Front Command's guidelines.

Ukraine claims to control 1,000 sq kms of Russian territory

Ukraine's cross-border offensive in Russia's western Kursk region is ongoing. The Commander-in-Chief of Ukraine's Armed Forces, Oleksandr Syrskyi, reported on Monday that the Ukrainian Armed Forces currently control about 1,000 square kilometers of Russian territory, according to CCTV news. Additionally, the acting governor of the Kursk region earlier reported to Russian President Putin that 28 settlements in the region were under Ukrainian control, and over 121,000 people had been evacuated from the border areas. Putin emphasized at a meeting that "the most urgent and important task at hand is to immediately drive the Ukrainian forces out of Russian territory."

Japan's producer inflation quickens as energy costs surge

Data from the Bank of Japan on Tuesday showed that the measure of input prices for Japanese firms gained 3.0% from a year earlier in July, marking the largest annual increase since August 2023. From the prior month, prices rose by 0.3%, matching the consensus estimate. Yen-denominated costs for imports of raw materials surged by 10.8%, reflecting the impact of the yen's depreciation on inflation. The end of utility subsidies drove up energy costs, with input costs for electricity, gas, and water rising by 6.7% from a year ago.

WTI tops $80 per barrel and an Iranian attack may boost it higher

WTI crude futures rose by $3.22 in a day, the biggest one-day gain since last October, to close above $80 a barrel as traders believed Iran could retaliate against Israel. "Algorithmic trend followers still hold dry powder in Brent crude, suggesting aggressions from Iranian soil could still spark additional buying activity from this cohort," said Dan Ghali, a commodity strategist at TD Securities. The gains signal a possible shift in money managers' positioning.

Last week, a bleak macroeconomic outlook prompted hedge funds and algorithmic traders to cut their net long positions in Brent crude on the Intercontinental Exchange to the lowest since the data was first published in 2011. Bullish bets on U.S. gasoline and diesel were also at multi-year lows.

NY Fed: U.S. medium-term inflation expectations drop to a new low

According to the New York Fed's survey of consumer expectations, the one-year-ahead inflation expectations were 2.97% in July, slightly lower than the previous month's 3.02%, and the median three-year-ahead inflation expectations fell sharply by 0.66% to 2.3%, the lowest since June 2013 when the survey began.

The New York Fed said perceptions of credit access worsened in July compared with a year ago, with an increase in the percentage of households reporting that it is more difficult to obtain credit than it was a year earlier. In addition, consumers expect gasoline prices to rise 3.46% next year, food prices to increase 4.67%, health care costs to climb 7.61%, college education costs to go up 7.15%, and rent to rise 7.14%.

OPEC+ oil production exceeds the target in July

Twelve OPEC countries had a combined oil production of 26.75 million barrels per day (bpd) in July, an increase of 185,000 bpd compared to June, with Saudi Arabia, Iraq, and Iran boosting output, while Libya saw a decline, according to OPEC's monthly report. Meanwhile, non-OPEC countries within the OPEC+ alliance produced 14.16 million bpd in July, down 68,000 bpd from June, with production declines in Russia, Kazakhstan, and South Sudan.

Specifically, Russia's oil production dropped to 9.089 million bpd in July from 9.115 million bpd in June, a decrease of 26,000 bpd. However, according to OPEC+'s production targets, Russia's July output should have been 8.978 million bpd or should have decreased by 111,000 bpd from June.

Last week, Russia's Energy Ministry stated that Russia's July production exceeded the OPEC+'s target by 67,000 bpd due to one-off supply schedule issues, but the levels in August and September should compensate for this. Additionally, the data shows that Iraq exceeded its target by 321,000 bpd, Kazakhstan by 95,000 bpd, and OPEC+ collectively exceeded the July oil target by 84,000 bpd.

[Today's Focus]

UTC+8 14:00 UK ILO Unemployment Rate

UTC+8 17:00 Eurozone ZEW Economic Sentiment Index (Aug)

UTC+8 20:30 U.S. PPI YoY (Jul)

UTC+8 01:15 Atlanta Fed President Bostic Speaks on the Economy

Risk Warnings and Disclaimers

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FED

Data Interpretation

Economic

The main findings from the July 2024 Survey are:

Inflation

Median one- and five-year-ahead inflation expectations were unchanged in July at 3.0% and 2.8%, respectively. Conversely, median three-year-ahead inflation expectations declined sharply by 0.6 percentage point to 2.3%, hitting a series low since the survey’s inception in June 2013. This decline was most pronounced for respondents with a high-school education or less and those with annual household income under $50,000. The survey’s measure of disagreement across respondents (the difference between the 75th and 25th percentile of inflation expectations) decreased at the one- and five-year-ahead horizons and was unchanged at the three-year-ahead horizon.

Median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—was unchanged at all three horizons.

Median home price growth expectations was unchanged at 3.0% in July.

Year-ahead commodity price expectations declined by 0.8 percentage point for gas to 3.5% and 0.1 percentage point for food to 4.7%, but rose by 0.2 percentage point for the cost of medical care to 7.6%, 1.9 percentage points for the cost of college education to 7.2%, and 0.6 percentage point for rent to 7.1%.

Labor Market

Median one-year-ahead expected earnings growth declined by 0.3 percentage point to 2.7% in July. The series has been moving within a narrow range of 2.7-3.0% since January 2024.

Mean unemployment expectations—or the mean probability that the U.S. unemployment rate will be higher one year from now—decreased by 1.0 percentage point to 36.6%, remaining below its 12-month trailing average of 37.7%.

The mean perceived probability of losing one’s job in the next 12 months decreased by 0.5 percentage point to 14.3%. The mean probability of leaving one’s job voluntarily in the next 12 months increased by 0.2 percentage point to 20.7%, the measure’s highest reading since February 2023.

The mean perceived probability of finding a job (if one’s current job was lost) decreased by 0.9 percentage point to 52.5%.

Household Finance

The median expected growth in household income was unchanged at 3.0% in Jul. This series has been moving in a narrow band between 2.9% and 3.3% since January 2023.

Median household spending growth expectations fell by 0.2 percentage point to 4.9%, the measure’s lowest reading since April 2021.

Perceptions of credit access compared to a year ago deteriorated in July, with the share of households reporting it is harder to obtain credit than one year ago increasing. However, expectations for future credit availability improved in July, with the share of respondents expecting it will be harder to obtain credit in the year-ahead decreasing.

The average perceived probability of missing a minimum debt payment over the next three months increased by 1.0 percentage point to 13.3%, the measure’s highest reading since April 2020. The increase was most pronounced for those with an annual income below $50,000 and those with a high school degree or less education.

The median expectation regarding a year-ahead change in taxes (at current income level) declined by 0.3 percentage point to 4.0%.

Median year-ahead expected growth in government debt was unchanged at 9.3% in July.

The mean perceived probability that the average interest rate on saving accounts will be higher in 12 months decreased by 0.2 percentage point to 25.1%.

Perceptions about households’ current financial situations compared to a year ago improved slightly in July, with the share of households reporting a better situation compared to a year ago rising. Conversely, year-ahead expectations about households’ financial situations deteriorated in July, with the share of households expecting a worse financial situation in one year from now rising.

The mean perceived probability that U.S. stock prices will be higher 12 months from now increased by 0.1 percentage point to 39.3%.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Samantha Luan

Stocks

Economic

We Are Not Getting Out Of This Scot-Free_1

Furchin/E+ via Getty Images

Last week, the markets saw their most volatile week of 2024 as the S&P VIX Index shot up briefly past 60 for the first time since the COVID-19 pandemic on Monday. The S&P 500 also had its biggest daily pullback since late in 2022 during the week, as Japan had its biggest down day since 1987. However, by the end of the week the VIX was back down to 20 and the major indexes only had incurred minor losses for the week.

VIX (Seeking Alpha)

To me, last week was a significant tremor in front of a larger quake yet to come. During Covid, the Western world instituted an unprecedented global lockdown for months, severely disrupting global logistics and supply chains. The Federal Reserve increased the money supply by 40% over two years, and the government pumped trillions of dollars into the economy via stimulus programs. This caused the CPI in June 2022 to hit 9.1, the highest level of inflation recorded since the early 1980s. This triggered the most aggressive monetary policy by the Federal Reserve since the days of Paul Volcker.

We Are Not Getting Out Of This Scot-Free_3

CBO/Capitol Economics

The U.S. federal debt is now over $35 trillion and the federal debt to GDP ratio has reached an all-time high, and both continue to grow. Fiscal deficit spending continues to be north of six percent of annual GDP. To think the central bank is going to engineer a "soft landing" for only the second time during my 57 years on earth (the sole one being achieved in 1995) given this backdrop always struck me as somewhat farcical and the result of investor hope over market history.

The economy and markets simply are not going to get off scot-free from all the monetary and economic dislocations of the last few years. Or as a recent ZeroHedge article put it more succinctly and eloquently:

You simply can't raise rates the most in recent history at the fastest pace in recent history on the most debt outstanding in history and not face consequences."

In today's article, we look at two well-known market sages that are signaling extreme caution right now. Both are globally acknowledged for their risk management prowess over the decades. We will also look at three key economic signals saying a recession is directly ahead.

Warren Buffett, aka The Oracle of Omaha, raised a massive amount of cash during the second quarter through his investment vehicle Berkshire Hathaway Inc. Cash balances swelled by $88 billion during the quarter to $277 billion, a record. Berkshire did so by disposing of massive stakes in Apple and Bank of America on the market during the quarter.

Mr. Buffett is famous for "being greedy when others are fearful, and fearful when others are greedy." He is clearly signaling the latter and is on record of saying he is finding few bargains within a market that is trading at roughly 21.5 times forward earnings on the S&P 500. Equities have never seen a higher valuation based on market cap to U.S. GDP, as they have hit in 2024 as well.

We Are Not Getting Out Of This Scot-Free_4

Goldman Sachs Global Investment Research

Then we have legendary banker and CEO of JPMorgan Chase & Co. Jamie Dimon, who managed to get that bank through the Great Financial Crisis in much better shape than most of its large financial peers. Mr. Dimon went on record again last week, stating the chances of a much anticipated "soft landing" are significantly lower than what the market is pricing in. He currently sees the chances of that event occurring in the 35% to 40% range. The head of JPM is also quite skeptical about whether the Federal Reserve will be able to achieve their official two percent inflation target.

U.S. Bureau of Statistics

As far as economic signals go, the U.S. unemployment rate has moved up from 3.5% early in the summer of 2023 to a current 4.3%. This has triggered the so-called Sahm Rule. This rule states, "that the economy is in recession when the unemployment rate's three-month average is a half percentage point above its 12-month low." It has reliably been triggered during all the recessions since the 1950s.

Benzinga

Then we have the normalization of the yield curve. The yield curve has now been inverted continuously since July 2022. Only one other yield curve inversion has had a greater duration. That was one that ended in 1929. Good things did not follow. The normalization of the yield curve following a significant inversion has signaled every economic recession since WWII. There is usually a lag of six to 18 months following yield normalization before a recession is entered, it should be noted. The yield curve has been inverted by more to 100bps at times (the largest divergence in 40 years) during the current inversion period. The current spread between the two and 10-Year Treasury is now down to just over 10bps and could well normalize over the coming weeks or months.

Conference Board

Finally, we have the monthly Leading Economic Indicators or LEI. This has also been a reliable indicator of an approaching economic contraction historically. Albeit, one that has been negative for just over two years now. The only up month over that time was in February of this year. My guess is the massive amounts of fiscal deficit spending and trillions of dollars provided by various legislation like the ironically named Inflation Reduction Act or IRA has temporarily distorted the usefulness of this indicator. Most likely, the recession that almost always follows negative readings from this historical reliable indicator has just been delayed.

So, two Wall Street sages are urging extreme caution, and three reliable recession indicators are signaling an economic contraction is in the offing. Investors should heed these warnings and position their portfolios accordingly. On CNBC this morning, long-time investor David Roche stated he "expects a bear market in 2025 caused by smaller-than-expected rate cuts, a slowing U.S. economy and an artificial intelligence bubble." These factors could trigger a drawdown of 20% and could start before yearend. He does see this downturn being "short-lived" as the Federal Reserve will "adjust" its monetary policy to lower rates further, it should be noted.

That seems to be a pretty solid baseline scenario, as it is unlikely the economy and markets can emerge scot-free from all the monetary and fiscal distortions of the past few years without paying some sort of significant price.