Some Research Highlights…

As I mentioned a few days ago, with the first quarter real numbers on GDP, monetary numbers and prices now out, I am in the process of updating the January 7th 2025 forecast piece on the front page of the website. Trump’s tariff rampage kind of pushed everything back about six months, but I still see the same overall 2025 pattern, euphoria followed by implosion.

In the meantime, here is some research that will be part of the larger forecast piece:

Monetary Drivers are Key at the moment. Here is the result of our continuing fundamental research that we started in conjunction with the inception of the eureka-perspectives.com site back in 2008. The site focuses on the interaction of the Markets, Politics, and the Economy.

Here are the five monetary drivers that can be followed on a daily basis through tradeable factors that provide change influence in stock market prices. They are listed in order of their daily change influence level for the period 1988 to date, with the dollar having the most influence over the whole period. 

When one breaks down the research periods to important junctures a little different picture evolves. The dollar always comes out as the most influential, and the 2Y interest rate always comes out as the least influential, Gold comes in second in two periods, while the 30-05 yield curve comes in second during one period. Oil comes in third place twice while the 30-5Y yield curve come in third once. Fourth place has seen a broader array, Gold, Oil, and 30-5Y yield curve, each once.

1. Listing in order of influence for total period 1988 to date:  1) Dollar;   2) Gold;   3) Oil;    4) 30-05Y yield curve; 5) 2Y interest rates.
2. The Reagan supply side Trickle Down influenced period, (February 1988-Sept 2011) shows this listing in order of influence: 1) Dollar;   2) 30-05Y yield curve;   3) Oil;   4) Gold;   5) 2Y interest rate.
3. Bernanke QE2 dominated period, (September 2011 – September 2021) shows this listing in order of influence: 1) Dollar;  2) Gold;  3) 30-05Y yield curve;  4) Oil;  5) 2Y interest rate.
4. Powell Monetary Re-adjustment period (October 2021- to date): 1) Dollar;  2) Gold;  3) Oil;  4) 30-05Y yield curve;  5) 2Y interest rate.

How do I use this information, first I believe that interest rates are the big factor in establishing macro levels of price, but are not big drivers in terms of trading changes in stock prices. On the other hand, the dollar, gold, and oil, are the three big measureable monetary factors in change of direction. A declining Dollar combined with declining Gold and declining Oil are powerful elements in a rising stock market based on our research, I combine their values to get a bullish/bearish index.

This method of looking at the stock market ignores, on the face of it, big Macro factors like earnings, GDP, consumer sentiment, money-supply, government debt, tariffs, etc. Of course, all these factors need to be kept in the back of everyone’s mind.