Midweek Macro Note: Living on Standby Mode - Powell, Tariffs, Technicals, Vision Note, Gold Signals

Discussing our short-term netural equity stance, the light holiday volume, tariffs, Powell's hawkish apathetic tone, technicals, gold signals, a note from our Vision team, & more.

Living on Standby Mode: Powell, Tariffs, Technicals, + Black Sheep Arbitrage (@DonMiami3, Chief Economist - MacroEdge)

Good evening MacroEdge Readers and & Community,

This Wednesday we’ve seen a return to some higher volatility - albeit with lower volume - as Powell continues to press the gas on a hawkish tone about the Fed sitting on their hands as it pertains to rates and policy actions by the Federal Reserve. This apathetic tone concerns markets that for the last two years have become accustomed to immediate intervention at the first sign of trouble (yes we saw some of that from the fiscal put last week) - though that does not appear to be justifiable per the words out of Powell’s mouth today. With Trump’s admin mentioning things about replacing Powell - and even legally looking at ways to dispose of the current Fed Chair (which I view as unlikely) - Powell is likely to shift further to this tone unless things really begin to spiral in the US economy. Powell highlighted the fact tariffs are likely to bring a combination of higher inflation and higher unemployment - both of which are negative for multiple expansion. Powell - like us - is shifting to a ‘standby’ mode - where we wait for further direction over the next 2 months to assess the deteriorating macro datapoints that are both tariff (and non-tariff) driven. IE: Nvidia and AMD issuing charges incurred of $5.5bn and $800mm today - which was reinforced by abysmal reporting from ASML. The likely outcome with that is that we have a short period of time here for the next few weeks to prepare for our next market direction - as technicals continue to reset from the major impulse 1 and 2 move lower. Let’s dive into the Midweek Macro Note.

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Remaining in Standby Mode (in the short-term)...

In a market lacking clarity - macro has been back in the driver’s seat. While much of this has been policy-driven in Washington DC - there’s no reason to press the gas here on volatility while things reset (both from a technical and policy standpoint) - in the short term. The Trump put last week put those in leveraged short positions on notice that they had overstayed their welcome for the interim - but that does not mean I do not expect further deterioration later in the year from crosscurrents that are both current policy from the Trump Administration, inherited a macro backdrop that was weakening, and an apathetic non-interventionist Fed (for the time being). You’ll see much of that outlined in our technical overview below - as the market continues to digest massive crosscurrents of headlines, tariffs/responses, product and export restrictions, weakening employment, and much more. While I expect volume to remain more subdued through the holiday, I expect higher volatility and volume to resume towards the end of the month with high difficulty for long-only traders.

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