Maybe This Time it is Real!

Markets continue to latch onto hope for an imminent Iran/U.S. deal, despite how many times it seems like the White House and various media outlets have been crying wolf the last few months.

Still, we are headed into a three-day weekend (markets are closed Monday for Memorial Day, the unofficial start of summer). Thus, it stands to reason that many market players are simply closing up shop early and filing out for a little vacation. We could easily see volume dry up into the weekend from now, barring a genuinely shocking development. 

Of course, the lingering issue with the Iran War is whether our oil supplies reach dangerously low levels by the heart of summer. By some accounts, July is the last line of defense. We know that the likes of Trump and Bessent have been doing everything they can to buy time and kick the can down the road (something The Fed has specialized in for years, by the way). And markets are still inclined to given them the benefit of the doubt--It truly just comes down to when we hit that breaking point. 

I still view this tape as being one where much less is much more, in terms of under-trading being preferable to putting on trades just or the sake of action. Gold continues to frustrate gold bugs in the near-term, but it was overdue for a major consolidation after the prior multi-year advance it enjoyed. My long-term adjusted target remain $10,000 per ounce, with stops around $7,500-$8,000 next, starting perhaps as soon as Labor Day with bullish gold seasons kicking in then. 

But the monster lurking under the bed is still the bond market. You are talking about several generations of folks on Wall Street, including some grizzled veterans by now, who only know the bond market as a benign, cuddly entity. However, if you know your history then the bond market is capable is humbling everyone when it wakes up, including federal politicians (quite the feat indeed). That is precisely what happened in the 1970s in this country, and it could happen again. 

Even with today's slight dip in rates, the 10-Year is back above 4.56% and threading a monstrous, multi-year breakout projecting it over 5.5%, according to my work. That is a scenario very few people, institutional or retail, let alone politicians and central bankers, are prepared to deal with anytime soon.