Gold surges on tariff tension

The Wall Street rally appears to be hitting a wall, think exhausted, amid overheating concerns. (Something I have been warning about since mid-July)

The Dow fell 224 pts, S&P lost 5, Russell dropped 7, Transports slid 180, and the Equal Weight S&P was down 5—while the Nasdaq rose 73 pts, thanks solely to the Mag 7, which jumped 118 pts.

Now, if you strip out the Mag 7 from the Nasdaq 100, instead of a 73-point gain, we’d be looking at a 45-point loss. That tells you everything you need to know — the Mag 7 is disproportionately driving index performance (a theme we talked about two weeks ago), creating a false sense of security for investors who think the rally is broad-based. Let’s be clear — this is not a “sell” signal for long-term investors. It’s simply a reminder of what the next cycle will most likely look like.

Seasonal reality check: August, September, and sometimes October is notoriously volatile. We’ve rallied hard since the April lows — and if you’re invested with a plan, you’re probably still ahead of pre–Liberation Day levels. But under the hood, the story is changing.

Indexes keep printing “New Highs,” but portfolios are starting to feel the drag. Tech is masking weakness across Industrials, Financials, Energy, Real Estate, Basic Materials, and Healthcare. In other words, the headline numbers say, “party on,” while the sectors say, “pump the brakes.” (Think – be patient!).

I have discussed how even good earnings reports (ex Mag 7) were getting sold while bad earnings reports were getting smashed. We have been discussing the seasonality of the markets and how this time of year tends to be weak which is why I have emphasized that patience is a virtue and that as a long term investor you need to make a plan, stick to the plan and not chase anything for the fear of missing out.... You're not gonna miss out, there is always an opportunity.

Yesterday’s scoreboard:

Winners: Utilities +1.1% (defensive + AI), Consumer Staples +0.8% (defensive), Basic Materials +0.5%, Real Estate +0.4%, Tech +0.1%.

Losers: Industrials –0.15%, Financials –1.15%, Consumer Discretionary –0.1%, Communications –0.5%, Energy –0.4%, Healthcare –1.15% (YTD’s worst at –6.22%).

Now here why this is important – If you peek under the sheets - Tech barely moved (+0.1%), but the sub-sectors told a different story — Semis +1.65%, Disruptive Tech +0.25%, Cybersecurity –2.5%, AI/Robotics –0.5%, Software –2%.

Bottom line - while the market’s ‘headline act’ is still Tech, the rest of the cast is out of tune (for the moment).

In fact - Analysts are now coming out in droves to warn of a near-term pullback due to lofty valuations and seasonal risks. Janney Montgomery’s Dan Wantrobski is just the latest to join the chorus saying that heightened headline risk could trigger “air pockets” in the second half of 2025. Morgan’s Mikey Wilson forecasting a 10% correction this qtr., (but take that with a grain of salt), Deutsche Bank thinks a pullback is overdue, Evercore suggesting up to a 15% pullback in the ‘near term’ (not defined) and that’s just a sampling of opinion – what is clear is that the message is the same. These warnings are driven by high equity valuations, tariff-related uncertainties from Trump’s trade policies, slowing consumer spending, rising unemployment, and potential inflation pressures.

Bonds ran into a bit of trouble…yesterday’s $25 billion auction of 3 & 10 yr notes was a ‘barn burner’! In fact, the media referred to it as ‘poor’ (I think poor is a bit dramatic) and that sent bonds down – TLT and TLH down 0.2% & 0.1%, respectively. Yields rose just a bit – the 10 yr is yielding 4.25% this morning up from 4.18% on Monday. The 30 yr is unchanged at 4.83%.

Oil continues to push lower — breaking through all three support trendlines this week. ($65.95, $65.49 & $63.61) This morning it’s up 33 cents at $64.21, but that’s still down from $67.18 on Monday. We’re now trading at the same lows we saw back in June, and I think we could find support right here.

While it’s convenient to blame recent weaker economic data for the drop, I’m still firmly in the camp that this is not a demand issue, (we have lots of demand) — it’s a supply issue – note I did not identify it as a ‘problem’ but rather an issue. I think it finds support right here.

Gold: A complete reversal over the past two weeks — from testing intermediate trendline support at $3,330 to breaking short-term resistance and challenging June’s high of $3,531. Overnight it hit $3,534; this morning it’s up $25 at $3,477. The latest catalyst? Tariffs — and here’s the twist: 100 oz gold bars are subject to reciprocal tariffs and not exempt, as many had assumed. That’s stoking tension and uncertainty, fueling demand for this classic safe-haven asset. A breakout here could target April’s “Liberation Day” high of $3,585 — and a decisive move above that opens the door to what I think will become a FOMO trade – only sending gold highe.

Next -

Fed Watch: Trump is now floating Fed Governor Chris Waller as a front-runner to replace Jerome Powell when his term ends in May 2026. Recall — Waller voted for a rate cut at the last meeting (something that Trump wanted) and was originally appointed by Trump in his first term. But, no decision has been made yet — the two Kevin’s remain in contention — but this feels like a market “test” to gauge investor reaction to a potential Waller Fed Chair.

Meanwhile, with Trump’s recent appointment of Stephen Miran — Chairman of the Council of Economic Advisers and a Trump loyalist — to fill Adriana Kugler’s vacant seat, the tide appears to be shifting. The pressure on JJ is mounting for the Fed to move on rates….. The only question now: will it be 25 bps or 50 bps in September?

There is no eco data today, but next week is a big week – both CPI and PPI are the headliners…..So, get ready!

European markets are churning higher – Italy and Spain up 0.8% while the rest of them are up marginally. Nothing to see here, move on.

US futures are UP! Dow futures up 107 pts, the S&P up 20 pts, the Nasdaq is up 72 pts, and the Russell is up 10 pts. Yesterday morning they were up as well only to fail as morning turned to afternoon in that typical sign of exhaustion…My gut says – expect the same today.

While the media keeps pushing this ‘new high’ mantra – look at your portfolio – Is it making new highs? I’ll tell you, mine is not and while it’s not ‘down,’ it’s just not making new highs and that is because it is well diversified….it is not just ‘tech.’ And what that tells me is that the market is exhausted.

I remain in the camp that we could see the S&P pullback to 6000 (the June highs) -- which would be a 6% pullback from the most recent high of 6427. Now, over the past month it has sold off and tested 6200 twice - and it appears as if it is going to do that again - and here is the KEY....If it tests and HOLDS then I think we're ok (for now), but if it tests and FAILS - then the move to 6000 will be swift. (Remember it always tests 3 times before it breaks and that is true in either direction...on the way up and on the way down.) I'm gonna wait to see what happens next.

Try the summer orzo, spinach, ricotta salata salad

Summer Orzo, Spinach and Ricotta Salata Salad – This is a great dish to serve at your next BBQ or even better to just have in the fridge. It is simple to make – no longer than 12 mins max. For this you need:

1 lb. of Orzo pasta, garlic, olive oil, fresh spinach, Ricotta Salata Cheese, and s&p.

Bring a pot of salted water to a boil and add in the Orzo. Let it cook until aldente – maybe 8 mins.

While this is cooking – heat some olive oil in a pan and sauté garlic…. just allowing the oil to take on the garlic flavor – do not burn the garlic…. Now remove from heat and set aside. Cut the Ricotta Salata into small bite size cubes – set aside.

When the Orzo is cooked – strain.

Return the Orzo to the pot. Next - toss in the fresh spinach leaves, and the oil and garlic – mix well to coat. (You want just enough oil to coat the pasta – you do not want the pasta bathing in the oil) Now add in the Ricotta Salata and mix again.

Now - Put it in a bowl and refrigerate. Done. It is a perfect side dish to any summer BBQ meal or is even good to just eat right from the bowl