Summary
Just yesterday, we wrote the following about the stock market’s reaction to the Fed rate cut: “This is just one more piece of evidence that the stock market is not the economy!” Today, we’ll expand on that by saying that the market in many ways is not based on economic conditions (as it once was), but rather the growth rates of mega-cap stocks and their valuations (as determined by the investment masses). This brings up an interesting possibility. In theory, the major indices could rally (or not fall into a correction or bear market) if the economy does slip into a recession. Treasury yields would drop (maybe substantially), potentially adding to the valuations of mega-cap growth issues. Indeed, we might be able to declare 2026 as “The Year to Rewrite Stock Market History” or “The Year to Edit the Economic and Financial Textbooks.” We have struggled mightily with our gold call, as the yellow metal approaches its October 20 all-time high. We have also been wrong with our U.S. Dollar Index forecast, looking for a breakout and then additional upside that just never occurred. To add insult to injury, the greenback has broken its recent uptrend and remains range-bound. The government shutdown halted COT data about the mi
