Please allow me to introduce myself, I’m a man who … predicts the rain,
I’ve been around to shed many a tear
As the Sky did … an about-face.
I was round in ‘88 year
When there dropped a foot … of snow and pain,
Made darn sure I used a big wide range
So you listeners … won’t seal my fate.
Pleased to meet you,
Hope you guess my name …
We all heard the prognostications this past week. We were told the storm would be historic, that temperatures would drop into single digits and for some in the upstate, into negative territory. We heard were told that wind gusts would get up to 45 mph and that the resulting power outages could last for days. We were told “Thunder Ice” was coming! That sounds like a spell from my son’s video game.
The city of Greenville rushed out at once and tried to fit inside Lowe’s and Home Depot, spending money that needed to be allocated elsewhere on things we might not ever use. If you didn’t already have C or D batteries, too bad. If you didn’t have a propane heater, you were done. If you didn’t have a bunch of water bottles, well you had to stay patient and get creative with the stores you visited. (Walgreens for me). Many of us spent our lunch breaks and evening hours standing in line or scouring store aisles. And all because that daggum weatherman, right?
Yes, there was a weather event, but it started eight hours late which changed the nature of the forecast. Yes, it did sleet a lot. But we were told it would be the much more crippling freezing rain. Yes, it did get cold, but not Northern State cold. No, the power did not go out (Sorry Tim). And did I utter every single line above over and over again … until this big blinding bulb flicked on over my head. I AM the weatherman. Or at least maybe that’s how I’m seen. Each week I’m giving the AccuMarket Forecast am I not? (In these articles, we give our opinion of prevailing market circumstances, but these opinions aren’t guaranteed to be correct or right for your situation. For personalized advice, call our office! ~ The Compliance Department) Boy, I am ever a hypocrite right now. And I can’t stand hypocrites, which of course, is why I don’t like politics, which is full of ‘em.
Our local meteorologists use models, such as the GFS and the Canadian and the European and the European AI (there’s a scary phrase). We use models, such as you see in Right Capital. It’s a Monte Carlo simulation or model that is being run with 1000 scenarios that predicts your chances of success in retirement. The meteorologists account for all kinds of variables, such as polar vortexes, low- and high-pressure systems, moisture, prevailing winds and cloud cover. We factor in the dollar index, market valuations, corporate earnings, unemployment rates and commodity prices on a macro level and on the micro level, “the stock side” we judge the growth of earnings per share, debt-to-income levels, competitive advantages and so on.
As I’m diving into some very striking data in some key variables this week, I’m trying to avoid the sensationalism of the “big bad snow” and temperatures being “just plain nasty” as one did on YouTube a few hours ago to describe the upcoming snow this weekend1. (To some degree, the meteorologists are setting themselves up for failure with talk of a “bomb cyclone”, no?) But it’s hard not to when I’m seeing this big rally in commodities just as the dollar index suffers more losses earlier this week, to now down 11% in the last year. Gold is up $1,000 an ounce in the last 28 days. To put that into a historical context, it took over 5,600 years for gold to hit $1,000 an ounce for the first time in 2008. Gold’s up 90% over the last year as Fed Chair Jerome Powell says the gold rally “doesn’t mean much macroeconomically.”2 Silver has blown up to $120 an ounce. That’s up 10% yesterday and another 5% today. Copper is up 51% in the last year and up 9.6% in the last day. Despite these sensational numbers, it’s Natural Gas of all things that is unnerving. From the $3.10 level 10 days ago on January 19th, it shot up to $7.82 before crashing back to $3.85 today. Bitcoin has been sitting out the rally and was the only major asset class that was down in 2025. Its one-year return is -21.8%. Bitcoin is down close to $10,000 in the last 10 days while the commodities it competes with have lit up the scoreboard. It’s surprising as the environment for a Bitcoin rally would seem perfect.
The decline of the dollar story is far from a new one. According to Peter Mallouk3 in the last 50 years, the purchasing power of the dollar has dropped by 83% while the S&P 500 has gone 50X including dividends, even if you factor in inflation. So why the soaring commodity prices? There are a few dynamics in play. Charlie Bilello did a great poll4 asking why Gold is up 90% in the last year. 30% answered it was the Debasement Trade, 25% said Geopolitical Uncertainty, as the “massive armada” per Trump enters the CENTCOM region near Iran. 28% pointed to Central Bank Buying as the dollar’s reserve status has taken a hit – a slight hit – but a hit, nonetheless. 17% of respondents said it was Return Chasing and Momentum as the rally becomes a bit of a self-fulfilling prophecy and the Fear of Missing Out or FOMO takes center stage.
Sometimes this Weatherman has to predict stormy weather. Unlike the weathermen on TV, I am not allowed to use emotional language, per our lovable, cuddly Compliance Department (These are statements of fact – we are very lovable. ~The Compliance Department), and I think that’s a good thing here. It’s far too easy to come to an emotional state that I might believe one thing or another about which way the market goes. I can tell you that predicting the stock market involves a lot more uncertainty and a lot more variables than the meteorologists have to deal with! As an example, let me construct an argument for the existence of these variables another way (and I do tend to believe the following):
Gold, Silver, Natural Gas, Copper are up. The S&P 500 is up close to the $7,000 mark. The pan-European STOXX600 in Europe is up 14.6% in the last year. Just about everything but Oil and Bitcoin are up. Asset prices are UP. Why? The dollar is DOWN, which drives looser financial conditions and rate cuts, higher GDP growth, higher asset prices (what administration wants the S&P 500 to go down?), higher US exports and resulting trade deficit and the big whammy … easier debt servicing for the US government. (Call us if you want an explanation of the chain reaction here.) Ask yourself what is the easiest way the government gets out of this National Debt Black Hole? They inflate the debt away. If they do, or more simply, fail to address the matter, it is asset owners that should win – owners of stocks and ETFs in the S&P 500, owners of European stocks, owners of gold and silver. Owners of assets. Who would lose in this scenario? Those who keep a lot of cash hanging around on the side for a “big bad snow” day or those with too much love for CDs and interest rate products.
My conclusion? I’ve got Sympathy for the Weatherman. We’re both trying to predict the future as best we can – the difference is, the weatherman doesn’t owe you a fiduciary duty and if her ruins your plans for the weekend there are no consequences. Studies show and investor luminary Peter Lynch will tell you that investors have lost far more trying to anticipate market losses over time than lost money during market downturns. I’m inclined to believe the declining dollar story as the pieces fit much better that way, and that will color my weather reports going forward. Owning assets may or may not be the right thing for you. If you want your prediction, not the entire Upstate’s, please give our office a call. Remember, if you listen to us, we’ll change your financial world …
Scott Wright
Portfolio Manager
The Wealth Training Academy
Sources:
2 @KobeissiLetter
3 @PeterMallouk
4 @charliebilello
