Stock market outlook
Bull or bear? It depends. What unit are you using to price stocks? The past few years of the stock market look very different depending on what you price it in. To illustrate, first we price the world stock market in terms of US dollars, then in terms of gold:
Same market, same five years, different pricing units.
Which is the real stock market? Using the same kind of rigorous logic used in mathematics, before you can ask such questions about something, you first must show that it exists.
In all of my three-plus-decades of financial experience, I have never run across such a showing. Yet financial media and financial professionals routinely proceed as if it has been shown.
Such gaps in the foundations of economics and finance are Financology’s stock in trade. So until proven otherwise, we assume there is no such thing as a chart of “the stock market”. Only the stock market in terms of some other asset. And only one of which is US dollars.
Generalizing one step further, there is no such thing as the absolute level of any asset. Only relative levels between assets.
US dollars are hardly unique for quoting stock performance. The Nikkei 225 for example is conventionally quoted in Japanese yen. But there’s no reason you couldn’t quote it in US dollars or for that matter quote the S&P 500 in Japanese yen.
With that out of the way, let’s acknowledge that the stock market in terms of US dollars is usually what people are talking about. That’s what we see in the first chart. On the other hand, what we see in the second chart is stocks in terms of real money. Some would argue – and indeed some do – that if either could lay claim to the real value of the stock market, it would be the latter.
The first point of view is bullish. Stocks are within a hair of all time highs in terms of dollars. It would only take a smidgen more declines in the value of the dollar – with no change in the value of stocks – for stocks in terms of dollars to reach new all time highs, resetting the bear market clock.
The second point of view is more ambiguous. Stocks in terms of gold are doing just what we expected, and rallying off extremely oversold levels. In terms of dollars, you could interpret that to mean that stocks are outperforming gold. But the five year chart window is nevertheless within the context of what has long been an ongoing bear market. Zooming out from the above chart, stocks are down in terms of gold since the dawn of the millennium. Like the above charts, the plot shows total returns, including dividends. That’s a bear market in progress for over a quarter century.
Stocks in terms of gold, since January 1, 2000
Stocks “for the long term”, anyone?
A quick word on other markets … Treasuries have a bullish bias due to the tightish stance of monetary policy. As George Soros once advised, bet against the trend whose premise is false. In this case, the trend is the Fed’s reluctance to cut rates and the false premise is that tariffs are inflationary. This gives treasury yields a downward bias as the Fed, much as it did in giving up its infamously wrong “transitory” theory in its last tightening cycle, once again grudgingly yields to reality. This of course is not a long term call … it is within the context of a secular bear market due to excessive debt.
Gold. For reasons abundantly of record, I continue to look for an excursion below $3000 some time before the end of the year, and above $6000 some time before the end of the decade.
Mega’s dispatch from England:-The oncoming Storm
On the surface all seems well.
Trump remains committed to Ukraine & its fast becoming his war. You like Nixon in the early 70s he faces to Delmer of getting “Peace with Honour” or “We didn’t get our ass kicked by Russia & co”.
The US has suffered quite a few “set backs” such as Iraq/Afghanistan not to mention that rather unfortunate business of getting chased out of the Red sea by a 3rd World power. Trump is trying to set a course but too many other factors are in his way.
BY now the Empire thought they would have dispatched Russia & Iran……its not gone their way. True they have got Syria although i think that will bite them in the years ahead.
Blighty?
Well the Labour party got crushed in the local elections, if this was a full blown vote for MPs Labour would not only lose its power, it would come a poor 3rd. Labour MPs are becoming somewhat alarmed by this as you might expect. indeed two factions are starting to appear.
The “Right” who have some understanding of where they are & a far Left that are still in the 1970’s mindset.
Prices are on the rise once again & the TAX risers are starting to hurt. Unemployment is starting to catch up. Welfare has been cut & much more is in the pipeline, it remains to be seen if the Labour party has the nerve to do this. The Bond market is begging to wonder as well, as i type this the 10 year is 4.8% & rising, Bloomberg suffered a “IT issue” while the bond auction was on as screens turned blank.
In the mist of this our beloved PM has had a “little local difficulty”. His private house was set on fire as was a car he used to use. It seems that an Ukraine male model (Rent boy) & friend were responsible………..Our PM has taken a keen interest in young men in the past it is said 😉
Mike
Mega’s dispatch from England:-Tide turns on Tesla
https://www.carscoops.com/2025/05/europe-rejects-model-y-as-sales-dive-over-50/
As already discussed Elon has made a number of bad moves. In short the Cybertruck can’t sold elsewhere than USA. Truck drivers can see its next to useless for anything other than swanning about in…….
He thought it was a smart move to jump in with trump, get Red necks to que up to buy his badly designed not fully developed “Truck” that can’t carry much. Its stainless steel construction puts one in mind of the last attempt at that …De Loren!
I could go on, China watched as Elon stood behind Trump while he hit them with MEGA import taxes, thus sales in China are falling fast. The cars are now old ish & the best he can do is new bumpers & lights.
The Big killer is not a crashing market or his crappy customer care….. its not China……Its GM. I think GM have hit Tesla BADLY with the new Equinox ev. This car is cheaper, better than Tesla…sure it takes a massive 7.8 secs to get to 60 mph rather than 4-8 sec depending on how overheated the Telsa battery/ motors are, it tops out at 112 mph which is fine for almost everyone.
I think the tide has turned, Elon is not Electric Jesus any more, the Libs hate him & are dumping his cars & the Red Necks wont touch his trucks…..
Stocks stand at an interesting juncture, having just tagged the all time highs – in dollars – reached back in February, and then pulling back. What happens next is a competition between dollars and stocks to see which goes down more. If it’s dollars, we get “stocks at new all time highs”. In the long run, I think dollars “win” this dubious contest, but am loathe to handicap the next few weeks.
Reader prognostications welcome…