Following up …

Yesterday I talked about the two indicators that weigh heavily on my analysis of the markets, The Monetary Multiplier and the Market Multiplier. Today we see the markets reacting to a high probability that the 2 year rate, and all rates are headed lower. (see our July 29th 2025 post where we talk about a 2.5 % 2 year as a distinct possibility down the road).

We are seeing a small bounce in the animal spirits index, up from the recent 3.18 low to 3.23 today, but still well below the recent 3.35 high. The Monetary Multiplier is still locked in its defensive area due to upward pressure by gold although the GLD/SPX (gold versus stocks ratio) is making a bit of a move today.

We also talked yesterday about how market players can easily get themselves caught up in situations where they get the market totally out of congruence with the fundamentals. I like to cite the March 2021 to November 2021 period where markets (got out of sync with the market multiplier) they were oblivious to the reality that the FED was going to really hike rates. That situation went on for a long time before the market brought the adjustment.

Bottomline, current market players are timid and cautious. The wild bubble phase is still down the road. To my thinking the Crash aftermath will be probably due to the totally overblown AI story.