Everyone's hoping for a soft landing. Of course. Who doesn't want no consequences for massive deficit spending? And it's possible. The thing about consequences is you know they're coming, but you never know when. They could be years off.
However - if we were to play Devil's Advocate here are a few caveats:
1) The Yen carry trade. Everyone assumes Japan has backed off their idea of rate hikes after the world almost collapsed when they hiked 1/4 percent. Everyone, that is, but Japan - who say they are going to keep hiking at least to between another 1-2 percent. Imagine if they do what they feel is right for Japan and decide not to care if investors in the US lose money. Wouldn't that be weird? And scary for the market:
We don't know how many trillions upon trillions of dollars are still short the Yen so that they could be invested in US risk assets. Imagine if they had to be all unwound at once?
2) The Pension Fund/ Private Equity time bomb. Most State pension fund officers are political appointees with no finance background. They've decided to trust the well meaning Private Equity folks like David "Howdy Doody" Rubinstein etc who have loaded them up with hundreds of billions of completely opaque asset bundles.. They can't tell them what's in them because then the competition would know and copy their strategy and it wouldn't be worth so much - but don't worry - the PE firms will let them know on a mark to model basis how much they're up every quarter!
Really, I'm not joking. Imagine these had to be marked to market at some point.,,
3) AI. Lot's of AI is being bought up. So AI firms are making big profits This should drive the new productivity miracle. Here's the problem: There is, so far, no way to monitize AI. Because AI is great at collating enormous amounts of information. But it is lousy at making sense of it. It can't tell the difference between something a Pulitzer Prize Winning historian wrote about World War II, and something some Moron Blogger wrote about World War II. And it's liable to conflate all that random information into a meaningless word soup. That's fine if you're using it for your blog. If you're using it to produce information that's liable to get you sued if it is wrong - Like any major coroporation - it's worthless. Ask any lawyer.
One day they'll work that out. Right now it's way in the future.
4) Just imagine that anything in the market causes a small crash. Nothing spectacular, but enough to scare investors out of overly leveraged positions. Imgaine that the employment data starts to fall off a little more than even the last massive downward revisions indicate, because, after all, employment if the most lagging of indicators . Imagine then that inverstors get the idea that the Fed is once again BEHIND THE CURVE. Imgagine. That might worry some people.
5) Imagine that either candidate gets elected and starts to carry out their stated agenda.
6) Imagine that either Ukraine or Gaza blows up to the point that the oil market gets disrupted and the price of oil shoots up?
Anyway, it's easy to play devil's advocate. Everything is probably A OK.
Still, a little gold might be a prudent hedge against all those far out scenarios.
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