Signal 1: The Fed drastically lowers the interest rates. Money supply increases. Stocks inevitably go up due to there being more money in circulation.
Signal 2: The Fed notices the and drastically raises interest rates. Money supply becomes stagnant.
Signal 3: Money supply is stagnant, however, stocks continue to rise. We are now in a bubble.
How long can this continue?
The Fed has painted itself into a corner and has already gone down to basically 0% interest. Will they have a negative interest rate next time?
6 Years of an artificially low interest rate has created a fake bull market that's only growing because money supply has drastically increased. This bubble looks like it could hurt much worse than the last two.
Why doesn't the fed stop making drastic increases/decreases to the interest rate? Why not a more gradual/linear change in rates? This feels like a casino.
Could The Fed learn from history? Maybe. But not likely when you factor in politics. The Fed would have to sit by and watch the economy crashing while it only gradually lowers interest rates over a much longer period of time, which would drag out the recession. Are they willing to do that? The last two bear markets lasted 1.25 and 2.5years. Imagine a recession that lasted 5+...
As for gold ...
During the Dot Com Bubble, gold dropped 30% but eventually rose into the Housing Bubble. Then during the Housing Bubble it kept rising and went on to hit an ATH . This time around, I'm confident gold will never see $800 again, and the top could be $5k+. It'll be interesting to see how gold acts during this bubble, will it continue up as it did during the Housing Bubble? Or is it going to go sideways for a while before a huge move up?
For me, it's incomprehensible to see how this doesn't fail, eventually. Will it be after this next bubble? 20 years from now? 50? I have no idea, but considering we're in a casino, I'm All-In that this is going to get ugly. (never mind when technology/AI starts taking more jobs while the global population is increasing...)
Time will tell, but for now, staying in stocks and gradually shifting to gold (and silver ) in the coming years seems like the best "bet"
OH! & don't forget about crypto... ;)
Until the general public loses complete faith in the US gov’t or war I don’t see gold leaving the $1000 to $1450 range. But when that happens, need to be on the gold train.
You may find my more recent XAUWCU chart interesting, which takes inflation around the world into account; Gold is at all-time-highs when all major currencies are considered.