Batten down the hatches

A credit storm is about to hit US markets, to be reflected in portfolio shifts from equities to bonds, and bonds to gold. It will be driven by an impending economic slump.

The negative consequences of MAGA are beginning to hit the fan. Elon Musk’s aggressive actions through DOGE are undermining or threatening to undermine government contracts upon which a significant element of private sector activity depends. The consequences for business confidence, particularly in service sectors, are dire. Looking at potential job losses, influential voices in establishment institutions are now expressing fears of a deep recession.

We are beginning to see these fears reflected in markets. In the last six trading sessions, the NASDAQ 100 Index has fallen over a thousand points, about five per cent. And bitcoin has lost 16% from its December peak. The dollar’s trade weighted index has declined. The signs are of increasing uncertainties ahead, threatening volatility in financial markets which will prove difficult for ordinary investors to navigate.

Is this marking the end of the largest credit bubble ever seen and the start of a vicious bear market in equities? Will the Fed cut interest rates more rapidly than previously thought? And what are the likely consequences for gold?