➡ Financial expert Vince Lancy suggests buying bonds, international stocks, and gold bullion, implying a shift away from US stocks. He believes this is a significant contrarian bet, predicting a weaker dollar and a rise in gold prices. Lancy also discusses the economic clock, which indicates a shift from recovery to boom. He does not recommend investing in US tech stocks or miners, but instead suggests focusing on policy and macroeconomic factors.
➡ The article discusses the performance of international stocks compared to U.S. stocks, suggesting that the gap between them may start to close. It also mentions that overseas equities are performing better than they have in recent years. The article also discusses the impact of geopolitical events on the gold market, suggesting that significant historical events often lead to bull markets in gold. Finally, it discusses the flow of investments, suggesting a shift from U.S. markets to emerging markets.
➡ The article discusses the current investment climate in America, where investors are expected to maintain their risk positions until there’s significant bad news on inflation or disappointing earnings. The author suggests that the focus should shift towards bonds, international stocks, and gold. The article also discusses the need for the U.S. government to reduce spending and cut taxes to manage the debt spiral, which could potentially lead to a recession. The author believes that these measures, along with a reduction in defense spending, could make U.S. treasuries attractive again.
➡ The text discusses the strategies and tactics of a political figure, likely Trump, who aims to dominate the news cycle, never admit defeat, and push for changes until success is achieved. His goals include raising tariffs, reducing energy prices, shrinking government, lowering taxes, and weakening the dollar. The text also discusses the potential economic impacts of transitioning from a big government to a small one, suggesting it could be positive for bonds due to its recessionary effect on the economy. Lastly, it mentions the potential for a bear market rally in bonds and recommends diversifying investments into international stocks.
➡ Hartnett suggests investing in emerging markets and gold, as they perform similarly to emerging market currencies. He also hints at mining stocks being a good investment. He believes that if geopolitics improve, it will benefit economies that are more mercantile and oil-dependent, like Asia and Europe. He also suggests that if peace is announced, emerging market stocks will perform well relative to US stocks, which could lead to a weakened dollar and make gold a good buy.
➡ The US economy is at risk due to potential tariffs, which could lead to a recession. However, the likelihood of a full-blown trade war between the US and China is low, as both countries understand the high stakes involved. This is due to the US controlling over 90% of global semiconductor manufacturing and China processing a significant portion of the world’s rare earth minerals. The current situation is compared to a divorce, with both countries negotiating and dividing assets, and it’s suggested that both are secretly influencing the price of gold.

This is big. This week he calls back his whole 2025 big thesis. Buy bonds because of price policy and profits. Buy bullion as befitting the boom section of his economic clock and buy international stocks implying sell US Stocks as emerging markets benefit and his client base rotates out of exceptionalism trades. Welcome to the Morning Markets and Metals with Vince Lancy where each morning Vince brings you the financial and precious metals news. Get you ready for your day. And now here’s Vince. Hello, I’m Vince Lancy and this is the Hartnet Flow Show. It’ll be presented two ways.

First way is the video walkthrough with commentary I showed on your screen and the second way is on the right hand side. When you get this in your email, Hartnett’s main points will be broken out below. Enjoy. Will also be using the right hand side of the screen to show the charts that line up with the comments that he makes. Further today we have some significant markups on the original in blue, some in green. We will read those as needs be. And let’s get to it. The first thing we’d like to do is go over a teaser note that we sent to the founders.

We gave them the report yesterday and the initial comment. Let’s just read what we wrote. We wrote yesterday on January 12, Michael Hartnett stated the following in conjunction with calling for gold to 3333. Quoting him, we say bank of America clock is in the boom phase, chart 5. And once again, once high bond yields and US dollar force the Fed to turn unambiguously hawkish and lower stocks, it will force Trump to mellow on tariffs. We will flip big then likely February or March. Now this is what he said on January 12, but he had also talked about this big concept at the end of the year last year he’s fond of acronyms and big is B for bonds, I for international stocks and G for gold.

Now he had done bbb, which was bonds bullion and breadth before, so this is partly a replication of that. But I think this week he comes a long way to saying that. Well, he essentially says that he’s pulled the trigger on his theory or at least their prop traders have, or at least some of their clients have. And he goes into why, he thinks why and when the rest of the marketplace will start to come around. This is probably a very, it’s a very big contrarian bet. He’s done everything but say sell, sell U S stocks, okay, so buy bonds, okay, buy international stocks, which means sell your US Stocks and buy Gold bullion.

Now, his reasons aren’t really that important for this conversation, but we wanted to share that with you along with the chart 5. If you’re not familiar with this clock. The arrow leads to that. The arrow leads to that. So when the yield curve has a bull steepening, we go from recession to recovery. When the yield curve has a bear steepening, we go from recovery to boom, which is kind of what we had just now. And when we go from. We get a bear flattening, although I don’t see that happening yet. We go from boom to stagflation.

He believes that we’re somewhere in here. And he’s got good reason to believe it. This is big this week. This is the note that I wrote. He calls back his whole 2025 big thesis. Buy bonds because of price policy and profits by bullion as befitting the boom section of his economic clock. And buy international stocks, implying sell US Stocks as emerging markets benefit and his client base rotates out of exceptionalism trades. You may not. In case you don’t remember, I have said many times as I was educated that if you’re bullish on emerging markets, you’re bullish on gold.

And he’s not disappointed here. Buy international stocks and buy bullion. These are. This. This is the same trade. It’s the weaker dollar trade, hardnet. All right, here’s his quote for the week on gold. And it’s rather confusing if you haven’t read the previous ones, but we’re going to translate it for you. There are no twin peaks in gold price. Bank of America forecast is 3,000 per ounce. Big history equals big gold bulls. 1930s depression 1970. Stagflation 9 11. Great financial crisis populism in 2000s. Chart 2. We’ll show that in a second. And regime change. Trump 2.0 determined to make history.

All right. Hartnett thinks higher than bank of America in general. There’s the PDF and there’s the chart. Right. All right. So from reading this, I came to a conclusion. He does not discuss minors at all. Please be clear about that. I want to make sure that I’m clear about that. He talks about everything but miners with regards to the reasons to buy gold and to not own US Tech stocks. So I’m going to piece that together somewhere in this post. But right now I want to get through the actual analysis itself. Okay. The flow show bigging up big scores on the doors.

Gold 8.5% stocks 4.1% commodities 3.3% high yield bonds 1.5% government bonds 1.4% investment grade bonds 1.2% cash 0.4% the US dollar down 0.7% oil minus 1.3% crypto minus 8.6% year to date Zeitgeist 1 SPW is my new international. It’s an investor on rotating from the Magnificent Seven. If you’re not familiar, SPW is a domestic company in technology. You can look it up. The the ticker is spw. The company’s name is SPX Technology. Zeitgeist too. I like this one. Trump’s traffic light is the stock market and stocks telling him to keep tariffs light so no reason to sell.

It’s an investor discussing the trade war. Now whoever this investor is, he came to the same conclusion that I did for different reasons. If you remember when Trump was when the tariffs were supposed to go into effect on February 2, every commodity dropped, including gold. Now, I’m not saying it’s bullish or bearish for gold. I’m just saying every commodity dropped except grains, which are not the focus for Trump. And oil. Oil rallied. So oil rallied and stocks dropped. That’s the, that’s a bad thing for tariffs. That’s the marketplace. That’s his alarm clock. That’s his tell that he should back off on tariffs.

And you may remember that soon thereafter, Canada and Mexico made compromising statements and Trump said he’s going to suspend application of tariffs until these conversations are over. I will say to you that Trump saw stocks and Trump saw oil and he said we don’t want this. This is a problem. Right? Especially since he had said cheap oil was incredibly important for his plan. So backroom dealing. Let’s put this on hold. Going to debate it behind the scenes, but I’m not going to do anything. Just don’t make me look bad. That’s my opinion, but that’s it. So that’s like ice to tell of the tape.

Multi year twin peaks in bond yields and US dollar charts 3 and 4 they are thus far risk on in 2025. XBD is at new highs. Regional banks and REITs tom are breaking above 2122 highs. Kre is greater than 70 and VNQ is greater than 100. Carry is real estate. I think it’s developers. I’m not sure what VNQ is. I’ll look it up later. Biggest tell investors need to close their big bond underweight. Simply put, in a previous report, Hartnett noted that there were several markets with kind of a double top formation, hence the twin peak analogy.

And it also happened the week that David lynch died. He called some of them twin peaks, implying that they were done, they were going to reverse and go lower, call it a double top. Gold also fits that category. And he said then that it was not a top. It will probably make a new high. And it did. Okay, so that’s what he’s saying there. Charts 3 and 4. Chart 3 a little bit small on your screen. Multi year twin peaks in long dated U.S. treasury years yields. So there’s your bond market on the left. Treasury yields five and a quarter percent.

Five and a third five and it was a 5.15% roughly. And we hit almost 5% a week or two ago. The right hand chart, chart four multi year twin peaks in the US dollar index. Not truly a twin peak, but he’s basically saying the high is it. He’s on alert for it. He’s just branding his opinion. There were other markets as well, deficit and gold. He does not believe cold was a twin peak and he happened to be right. All right, next. Oh, by the way, that whole, that whole thing translates to him as, as the biggest tell investors need to close their law, their big bond, underweight, foreign, don’t get short bonds.

If this is the high in yields and that is the high in the dollar, then bonds are going to go down. Now that’s not a reason. Bonds are going to go up. That’s not a reason. He gives the reasons in the report and those reasons are based on policy and macroeconomic things. We’re in his sweet spot now. We’re in the whole secular moving into the macro area. All right, next, the price is right year to date equity returns in US dollars. Brazil 12% Germany 10% China 6% UK 6% Australia 6% Canada 4% US 3% Japan 1%.

International stocks are front running peak. US exceptionalism. Geopolitical peace, Middle East, Russia, Ukraine, no escalation in US China trade war, only one that matters. Okay, his contention is that US Stocks the gap between performance of US Stocks. He doesn’t have that chart this week. It would probably serve him right to have. It’s a good one. The gap between US stocks and international stocks has been yawning for years now. And his contention is that that gap will start to close, meaning U.S. stocks will underperform international stocks or international stocks will catch up one way or the other.

Now he’s saying here that year to date, overseas companies, overseas equities are performing better than they have been over the past several years. And to him that’s international Companies, international stocks, front running, PQs, exceptionalism, which implies those stocks are not as fearful of tariffs as they should have been, as they were before. I should say, number one. Number two, they’re looking at no, let’s say new risk geopolitically, Middle East, Russia and Ukraine, perhaps you’ll get some peace out of there and no escalation in US Trade war. Only one that matters, US China trade war. I would, I would emphasize this.

The only trade war that matters is the US And China trade war. And he will get into why he thinks so later on. But I’m just going to get this out of the way, having said it before, but wanting to restate it again. Trump’s style is to snowball when he can so win the little battles to line up for the big boss. China is the big boss, right? So if everyone is looking at the world as splitting into a protectionist, regional, Cold War II situation, mercantile, what have you, you would think he would be hugging or making nice, nice with his neighbors, his geographic neighbors.

And the answer is no, he’s not going to do that because he starts with a stick, he wins the battle, declares victory, and then he looks at China and says, you’re next. Right. So that’s his style. And the fact that he did not declare victory and he backed off verbally berating Europe should tell you something more on that as it goes into. What did I write here? My note is international stocks are starting to move away from tariff risk towards US Dollar weakness. Right. He also thinks the US Dollar is going to weaken. And the point that I made before is gold is an emerging market on the right hand side there.

I’m going to leave this up while I read this. This is the gold section, the overt gold section, one of two biggest picture, no twin peaks in gold price. New highs. Bank of Fort bank of America forecast is 3,000. His about a month ago was 33.33. Now, I know it’s kind of a cheeky thing to say because they were also calling for stocks at 66. 66. But just keep in mind that he’s, he’s telegraphing that his target is higher than 3,000. All right, big history equals big gold bulls, meaning when history is made, gold bull markets commence.

So 1930s depression, 1970s stagflation, big moments in history, big episodic historic events. 9, 11, great financial crisis, populism in the 2000s. And he’s calling Trump 2.0’s regime change. Trump is determined to make history. And you know what I agree with him. What did I write here? Trump is determined to make history. Gold makes new highs when or after big history is made. Okay, that’s, that’s a silly little comment there. But let’s get to the actual chart so you can see what he’s saying in chart form. So there’s the chart. What does that look like if I make it larger, get smaller.

All right, so you’ll notice that he’s labeling these as bull markets. And you could also make the case that it’s really one or two bull markets and he’s labeling events during mid bull market. And you would be right probably to do that purely from a historic point of view. However, however he is saying that when you have. He’s right when you say that whenever we have big events they are not occurring during downs, during down moves of gold. So going to the more recent one, recent ones 911 is in 2001 and there starts the biggest gold bull market in 40 years.

Until now. Right, right. 2008, great financial crisis happens in the middle of it actually gets it going again. 2018 interestingly enough he sees in parallel the US China trade war started. Now we may not have felt that in the equity markets but that kicked off a big run up in gold and it never gave it back. It ended that whole. You may remember between 2012 and 2018 or 2013, 2018, it was just complete death for goal between 1100 and 1300, give or take. Okay, so the Russian Ukraine war boom. And now you have Trump 2.0. And that’s his point.

Historic events, historical events like what Trump is trying to do right now. Well, gold is bought during those time frames. There’s a little bigger version for you. Hey, back to the, back to the script. Before getting into his main discussion. The weekly flows. Money actually came out of gold. That’s a good sign if you’re thinking like he is. Flows to know investment grade bonds. It seems like every week there’s money going into them but they never go Anywhere. Trend Treasury’s first outflow in seven weeks. Emerging Market Debt Biggest Two week inflow since February 23. Japan Largest inflow since October 24.

Tech first outflow. So there you go. Here’s his story. His story is that the world is starting to move out of us and into emerging markets. Now mind you, he’s not saying yet that you should all be doing that. He’s going to give some levels on that. Uh, we’re going to skip bank of America private clients actually. No we’re not. $3.9 trillion assets under management of the 3.9 trillion. This is basically their own retail clients. Of the 3.9 trillion assets under management, 63.3% are in stocks, 18.7% are in bonds, 11.2% are in cash. Note low big allocations.

Allocation of bonds is the lowest since July 22. Retail is not in this market. International equity markets just 13%. Well, that might be a function of how money managers steer the money of just total ETF positions. Care of, right? Exactly. Care of the Magnificent Seven equaling 37% of top stockholders. Right. No one’s buying international stocks. They’re all buying the magnificent seven. And allocation to gold is just 0.2 of total assets under management in the past four weeks. Private clients buying bank loans. Staples, discretionary ETFs selling low volatility Health care, high dividend. Okay, that’s a boom sign.

So clients are buying bank loan stocks. So stocks that do better from bank loans or bank loans themselves. Securitized riskier discretionary ETFs or ETFs where it’s not automatic. Consumer staples. That doesn’t seem risky. Selling low volatility healthcare, high dividend ETFs. Okay, out of dividends into risky. Hard to say. I’ll tell you what’s not mentioned here, but I know, I know that money’s going into it. Miners. We’ll get into how this all ties into miners, at least from our point of view in a minute. Boa bull and bear indicator up to 4.3 from 4.2 on inflows to high yield and emerging markets Bonds, bullish hedge fund positioning and oil rolling impact from bullish bank of America Jan Global FMS meeting survey.

It’s interesting that the hedge funds are just going to think out loud here. Interesting that hedge funds are bullishly positioned in oil, but it was not really going anywhere. In general, I would say this we can ignore this this week. Okay. It’s not giving you an extreme one way or another. The big picture. I think I put that under the main discussion. Yeah, there you go. So that’s the main discussion. U S Stocks are at all time highs. Gold is at an all time high. Crypto is at all time highs. Yet U S treasuries are 50 below the 2020 all time high asset prices the past five years have traded themes of anything but bonds.

ABB, anyone but populists, ABP anywhere but China, ABC and all in on AI I’m going to call him on that one. I don’t remember that one. But I might have missed it. Q1, 2012, 2025. Investors remain positioned for up in US stocks, up in US dollar, up in US yields. Okay? This is important from his point of view after the election, what he had said was the Trump trade buy all the things that do better under Trump, which is US Stocks, US Dollar and US treasury yields bearish or bonds. And that’s Trump. Strong dollar, weak bonds.

That’s Trump. He said that that would start to roll over. Look for it to start rolling over after the inauguration. And then he kind of passively pushed it out and said by the end of Q1, now you can look at this as I’m kicking it down the road. I, you know, and that would be cynical and, and you might be right, but I, I’m looking at it more like this. He’s not changing his mind. And the art, the art is in finding the moment that it happens. And that’s where the indicators have to hit. Okay, so what he’s saying by this is that American investors are still heavily positioned for that reality, okay, that they haven’t backed off much, if at all.

And he’s implicitly saying it’s crowded and any news that changes Trump’s approach towards truly making America great again, using his phrase, will not necessarily be through a strong dollar and it will not necessarily be through tariffs and U S bonds might not necessarily suffer. Now, he then goes on to say that these investors are likely to completely stay risk on until A, either a second wave of inflation causes Fed hikes, right? Everyone’s going to stay in stocks and, and stay short bonds. They’ll stay in stocks and if the Fed hikes, it’s over or B US Growth surprises down, save the fiscal tightening or payrolls being less than 50,000 credit event.

All right, so basically he’s saying he expects most of American investors and investment funds to stay in this trade until either they get really bad news on inflation, right? That’s a. Or earnings really start to disappoint or we get a really bad payroll situation. Meaning payrolls are too hot. It’s hard to say, but I understand what he’s saying there. The reason I’m paying so much attention to this is because he’s already in. He’s not waiting for that. The big trade in contrast, we are long big in 2025 expect contrarian outperformance of bonds, international stocks and gold.

He’s already in the prop desks have someone, he has someone for his own private book, I’m sure. And their clients are starting to move that way. So. And he’s seeing things as I am on the Trump side that make this all the more enticing. The planets are lining up. All right, so now we get into the actual trade itself. So the big trade is bonds, international stocks, and G for gold. He’s already touched on gold, and he will come back to it in a little bit. But the focus of his main section today is bonds and internationals.

He spends a lot of time on internationals, as you would expect. If you know that most of their clients are in equities, if trillions of dollars are in equities and millions of dollars are in gold, then you’re going to spend your time talking about equities because that’s where everyone’s risk is. All right, so here we go on bonds. I have a lot of notes in this one, I think, but I put them really far out on the margin. Make Treasuries great again. Before we start on this, I should just remind myself that he called us being in a secular bear market about three years ago, and what he initially called a cyclical bounce in bonds, he is now saying could turn into.

Should turn into a secular bull. We’ll see. I’m not saying I buy that, but his case is made pretty well. All right, here we go. Make Treasuries great again. We expect U.S. treasury yields to fall below 4% period. There are $37 trillion of government debt and budget deficit of 9% GDP in the past five years. That has been a huge catalyst for 50% jump in U.S. nominal GDP since 2020. So government spending, which has hurt bonds, that money has gone into the economy and like it or not, it’s been a huge catalyst for the jump in US nominal GDP since 2020.

The $7 trillion US government. Elon Musk must love to see this. The $7 trillion US government is now the third largest economy in the world. Our government alone is the third largest economy in the world. And Trump Musk need U.S. government recession to arrest U.S. debt spiral. Interest payments rise 100 to 300 billion over the next 12 months. Chart five. All right. This is good stuff. This is chart he’s had before. He’s bringing it out again. You can look at the chart. Okay. What, what he’s, what he’s saying here is very, very Reagan esque, very Volcker Reagan duo in a mini version.

Okay? Trump needs a re a you. Trump needs US Government to shrink. Okay? He needs that to stop the US Debt spiral, meaning all the money that we spent on keeping the economy afloat. That has to stop. It has to correct itself because of the debt payments, interest payments. The word recession is key here. He says Trump needs a US Government recession. What he really means, I think, is we’re going to have a recession based on all the government people getting fired and shrunk. That’s what happens. That’s what happened under Reagan. Volcker, shrinking government means spending less government money.

So you could see what he’s doing now. He’s on a rampage. Doge is on a rampage doing that. And taken together well, you’re going to start risking recession from doing that, which makes perfect sense. Then he needs to persuade, right here, GOP deficit hawkish Freedom Caucus to back Trump tax cuts via budget reconciliation. All right, he’s laying out Trump’s wish list here. If the risk of recession grows, as it will as government shrinks and government spending is tabled or stopped, then he’s going to need something to get the economy going or to keep it going, and he’s going to look for tax cuts.

Okay, again, this is what Reagan did, right? So he knows, or they know, that the GOP is deficit hawkish. It’s called the dep, it’s called the Freedom Caucus, and he needs them to back Trump tax cuts. So if you were to split it down politically in order to push tax cuts through, he needs to get Freedom Caucus on his side, which is the, the fiscal conservative GOP group. Okay? Now, Doge, the Department of Government Efficiency targets 1 trillion of public sector savings. Okay? So they’re advising the President this way. BoA, Global Research Economics. Base case is 150, 300 billion in savings, but could rise to 500 billion, 1.5% of GDP if the administration is successful on spending impoundment and layoff related litigation.

Okay, so Doge Musk is saying, hey, we’ve got, we’re targeting 1 trillion of public sector savings. BoA says the base case is 300 billion, but it could go as high as 500 billion if the administration is successful on spending impoundment and layoff related litigation. US defense budget is greater than 900 billion in 24 versus 630 billion. 19, chart 6. Let’s bring that up. There you go. Remains tempting source of savings as forever wars end. All right, so this whole first paragraph here is the present and the immediate future. So he’s really giving you a timeline of where we are.

And we’ll come back to tariffs in a second. But the most immediate news has been who’s getting fired, who’s accepting layoffs, you know, Furloughs the scandal at usaid, all very real. How big it is, I’m not really sure. But it’s all very real. And it cuts deficits. And in doing that, let’s assume that you’re firing one third of the government in one way or another, right? If you’re not spending government money on whatever USA was spending it on, well, then that’s going to cause a recession somewhere. Maybe Politico will have to get some real clients for a change.

Anyway, you get the point there. If he cuts government spending, which is here, he will need to do that in conjunction with some good salesmanship to persuade the GOP Freedom Caucus to back him on tax cuts. So basically, he’s a horse trader. I even wrote a post on this. He’s a horse trader, right? He’s going to the Freedom Caucus and saying, what do I have to give you for you to give me backing on my tax cuts? And they’re like, well, get rid of government spending. He’s like, I’ll see you in a couple of weeks. And that’s what he’s doing right now.

Now, if he does that, what does he do? What does he do? He reduces government spending, which triggers recessionary impulses, but then he lowers taxes, which is. Balances it back. He also might go to, and this is where I think Hartnett’s kind of like advising him here. He’s also basically saying, hey, the U.S. defense budget. Isn’t Elon Musk talking about the Pentagon now or Trump talking about the Pentagon? The defense budget is pretty big considering that we’re not going to be spending as much as we had on forever wars, not to mention the less money we’ll be spending in NATO based on his projections there.

So when you look at these things together, he’s saying to make treasuries great again in the Trump way, you cut government spending, number one, you reduce taxes, number two, okay. And then you do more government spending cutting, okay? That’s the first section. And tariffs are not going to happen, I think, at least not for a while. And we’ll get into that in a second. So here are my notes. The green section are, are based on personal experience and belief and knowledge and understanding of how markets work to an extent. All right, so his Note is bond sub 4%.

This is the Trump playbook wish list. My words essentially probably restating what I said. US Government bond shrink. US Government shrinkage to lower deficits generates recession. It’s very Reaganish. Tax cuts come next. Right? Note overt. Here’s the, here’s the tariff comment. All right, think about the, the, the context is two weeks ago we were talking about tariffing everyone, right? Okay. He’s not talking about it anymore. It’s a quick turnabout. It’s a quick turnaround. This is part of his style. Change the subject if you’re not getting anywhere. Never admit defeat. And these are all parts of the things he wants to do.

He wants to raise tariffs, he wants to lower energy prices, he wants to shrink government, he wants to lower taxes, and he wants a weaker dollar. He’s pushing on those walls and whichever wall gives way first, he’s going to just collapse it. So let me read these notes here. All right, Tariffs are being backed away from as Trump rhetoric pivoted immediately, from punishing neighbors to, to musk doge reducing government. Think about the news cycle. We went from let’s invade Mexico to Let’s invade Washington D.C. right. And Gaza. That’s a joke. Like that’s something to throw you off.

Mainstream media are dogs chasing their own tails. He’s in control of the media. Trump’s public style is all about dominating the news cycle. Don’t give enemies to attack. Any errors if you make any. And never ever admit those errors anyway. Frame, for example, this is what just happened. He framed the Mexico, Canada as a victory, even though it looks like, from my point of view, it looks like a publicity stunt to gain cred pre China showdown. Right. He threatened tariffs. He would have gone through with them. No doubt about it. Mexico and Canada said, come on, we know that you’re playing a game here.

We know that you’re gearing up for China. You’re beating us with the stick. What’s the carrot? Well, you know, tell me that you’re negotiating it. Put some troops on the border, make things look good, commit to something and I’ll put everything on hold. Because the bottom line here is, well, he looked at the markets when he said that stocks dropped and oil rallied. That’s not a good look for tariffs. And that’s his most important barometer. Those two things. Okay, again, any tariff showdowns are just mini showdowns. Remember, you know, Hartnett just said that he goes, the only trade war that matters is the one with China.

Not okay, but okay. So here’s my comment about Mexico, Canada, but not getting what he wants done in Mexico. And Canada tells you he isn’t getting his way with China and to move on. Never make final assessments, never declare anything, just move on. Everything is open, end with it. His style is to own and steer the News cycle. Never admit you’re wrong. Keep pushing on all those walls until one gives. And all his tactics serve his strategy. And the strategy is in this case, creating a historic legacy and in the process steering our economy out of a service economy and into a manufacturing economy in preparation for a more divided regional world.

Okay, so that’s my notes next bullet. So this whole section, we just described that whole section there, right? Big government to small government is also bond positive via labor. Okay, now I have a problem with this, but I’m going to just try not to complicate things. This is what he says. Transitioning big government to small government is also a bond positive because of the labor market. US public sector government education, health accounts for 1/3 of US payrolls. It created 1 of out of every few 4 jobs this decade. The public sector payrolls are currently growing 3% year over year versus less than 1% year over year in the private sector.

That’s pretty. That’s gross. That’s. That’s a combination of things. That’s your unions, that’s your COLAs. Small government equals, smaller government equals. Here’s his reason why it’s bullish for bonds. Smaller government equals public sector jobs down. US payrolls peak in H125. In addition, new immigration policy equals bonds bullish. US Mexico border encounter is falling sharply 800k in 24. Q4 23. 300k in Q4 24 likely to fall towards zero in Q1. 25. Note. 3.9 million jump in number of farm born workers since January 20th. Chart 7. We’ll get to that in a minute. Accounted for greater than 90% increase in labor supply.

An increase that boosted profit margins and consumer spending which were bond negative catalysts. And they are set to reverse as foreign workers fall in 25, 26. Right. This section here. Let me pull a chart up for that. Simply put, he’s saying I’m gonna have to stretch this out. Immigrants leaving are bullish bonds because their presence boosted profit margins causing inflation and that will lessen with their exit. I’m not sure I agree with that. Maybe I’m misunderstanding what he’s saying. Immigrants leaving is not inflationary according to him. Or rather cheap labor leaving will squeeze profit margins forcing money out of stocks into bonds.

I’m not sure about this at all. Would rather he just said. I really wish he just said this. Immigrants leaving are somewhat inflationary. But the government workers getting fired will more than make up for it in recessionary forces. Mean the money we’re going to save from union Workers, you know, being forced to retire. It’s what universities are doing. You know, I teach at university and they have a lot of tenured professors and it’s been a big drag on their, on their business model. And as an adjunct professor, I’m gold to them. I would think if they could, they would hire all adjuncts, all part timers at this time.

Okay, so here we go. I’m just going to summarize this whole bullet by saying this big government to small government is bullish for bonds because it’s recessionary for the economy, period. And it’s not as inflationary sending immigrants back as you would think. If he says it that way, if he means that, then I’m completely on board with what he’s saying. All right, this is a cool one. This is tactical. All great bull markets begin with a bear market rally. Unloved Treasuries are in a bear market rally. In 25 remain best allocation hedge for a top in asset prices and bond risk reward improvement.

We calculate low risk bond portfolio. We did that in a previous post as 20t bills. 2030 year US Treasury 20 investment grade bonds 20% high yield 20% emerging markets generates 9 to 10% if US treasury yields fall back below 4%. So basically he took his model and dropped yields down to 4% and then just looked at these varying other sectors and saw how it would translate through them. And they expect U.S. treasury yields to fall below 4% in 25. I mean, period, straight up. That’s what he’s saying. I mean, there’s no hedging himself here. He’s bullish bonds, period.

And he’s saying that it’s starting as a bear market rally. It could go below 4% and it could become a secular rally. That remains to be seen. But I understand where he’s coming from on this. If Trump gets to fire, everyone wants to fire and Trump gets tax cuts, he won’t need PAL to ease. I mean, he’ll need PAL to ease. But the point is bonds will do well because it’ll react to the decrease in spending. The outlook is the future, which might have a mixed result on gold. Hard to say on international. He has said it before and he’s re emphasizing it now, that he believes that American exceptionalism in terms of equity performance is going to stop.

And he’s recommending to his equity investors, of which most of his investors are equity investors, to rotate a portion of their portfolio into international stocks, out of US Stocks. Now the other thing I want to add to this is there’s a lot of money on the sidelines and that money is typically assumed will go into U.S. stocks. And let’s assume that it does. Well, if you’ve got Heartnet saying I like gold, okay? And you’ve got Heartnet saying, I don’t love American tech, I’d rather you buy international stocks. And you’ve got a lot of money on the sidelines that’s getting ready to go into stocks.

And they’re already heavily exposed into, into tech. And you’ve got a lot of clients looking at Partnet saying, I understand what you’re saying. I kind of agree with you. Well, you have a recipe for some of that money to go into miners. Okay, so emerging markets and gold perform the same way in an inflationary environment, in a deflationary environment, they may as well. But I haven’t really seen one of those in a long time. The point being is that gold is kept down unintentionally, let’s say, because American global reserve currency status and our ability to wield it or weaponize it keeps countries in the bricks from prospering as much as they could.

Now that’s not the only reason they’re not prospering, but it certainly is a little bit of an anchor around their neck when they’re trying to get things done, considering that all their debts are in dollars and their currency keeps devaluing against the dollar. Okay, Gold is an emerging market. It’s an emerging market, number one, because it competes with the dollar. Okay? So a strong dollar hurts BRICS nations because their currencies are not dollars and they have to pay their debts back in dollars, so they’re forced to hold dollars. And gold is something that, that competes with dollars.

It’s denominated in dollars. So that’s one reason that gold is an emerging market. It is financially performing the same way as an emerging market currency does. It’s inverted to the dollar. The second reason gold is an emerging market is because they literally, many of these countries, literally, if not all of them, have a substantial portion of their wealth in gold as a hedge, $4. And they do produce gold. These are commodity producing countries. Now if gold has any correlation that keeps it same and you’re a BRICS country. It’s gold versus energy. Commodities are commodities of gold’s not money.

It’s still a commodity. And so how oil goals goes, gold should go one way or the other. And so gold is an emerging market. I’ve said that before, saying it again, getting it out of the way again to say this I’m Hartnett and I’m telling you, sell tech, buy emerging markets and also buy gold. He’s telling people in a roundabout way, miners are a better buy in the US than probably anything else. And he’s not talking about it. And he may not talk about it, but, but when he does, remember this conversation, remember this moment. Because if he does, if he doesn’t talk about it with someone, if he’s not talking to a client right now about this and they’re saying, well, based on what you’re saying, maybe I should buy some miners, he’s either going to say yes, no, because they have international risk, or yes, it’s early.

Okay, so that’s it. If a minor has international risk, that might be the reason that Hartnett doesn’t want to say anything. However, otherwise the answer is yes or yes, you’re early. So if he likes to be early, I like to be early. And I’m sure there’s things he’s talking about he’s not talking about publicly yet. And that’s it. Hartnett is implicitly bullish. Mining stocks, there’s money on the sidelines going into them, not into tech. And before reading this, I was considering putting a trade on. And then after reading it and then testing an AI logic, I shorted tech and bought miners.

Not a big thing, but something to keep my toe in the water. Anyway, that’s it. That’s it. He’s bullish miners. He’s not saying it, but if you just add everything up, he’s bullish. Miners. Right, and they’re all making money to begin with. All right, back to the back, to the back of the show, there’s a chart. All right, okay, so let’s start global stocks, simply a cheap. With catalyst play in 2025, China stocks are trading on 10 times. UK and emerging stocks on 12 times, Europe on 14 times versus the US PE of 22 times. Earnings.

Bad geopolitics are great for tech and defense. Heavy energy, independent US less good for mercantilist, oil dependent Asia and Europe. But geopolitics in 2025 is shifting from bad to good. All right, in case you’re wondering, if you’re trying to read this on your own, you read to the semicolon. The semicolon is the thought. Everything on one side of the semicolon is a thought. It’s kind of like his bullet. His bullet is a semicolon. That’s how I read his stuff. Okay, Global stocks are cheap. And this year, to rephrase what he’s saying and this year they seem to have catalysts in place.

What are the catalysts? Well, if the geopolitics does improve, then that will be better for their economies which are more mercantilist and oil dependent Asia and Europe. Okay, so if geopolitics are bad, then the dollar is going to be strong. If geopolitics are bad, then everyone’s going to buy tech and defense heavy stocks which are US and parts of Europe. And if geopolitics improves, it’s out of US based stuff and into other countries in general and industry wise, it’s out of tech and into more mercantile based stocks. That’s it. So as long as geopolitics shift more friendly, that should happen.

Look, if, if peace isn’t. How’s this? If peace is announced in the extreme anywhere, watch out emerging market stocks perform relative to US Stocks. Right, do that. Now gold will probably dip if that happens. But if emerging market stocks go up, then gold is probably a buy because it will mean a weakened dollar over the long term. Right. Initially gold sell off. All right, next, Next semicolon manufacturing recessions are good for US Growth stocks. The manufacturing recession is ending, which is positive for global value stocks. All right, simple enough. Growth stocks during a manufacturing recession. You know, tech growth, that’s just, that’s just the way it is.

That’s the reality of the economics. All right, next, colon, China. One thing I want to touch on here, PMIs, right? PMI is at a purchasing manufacturing index. So if the PMI is a week, that’s where we are now. Right. Then we’re in a manufacturing recession. If the economy is good in the PMI is low, then the manufacturing is weak. Right. So he’s saying that PMI is, are in a contraction range and it needs to be in an expansion range for you to say that they’re potentially overbought. Right. China, Europe easing fiscal policy in 2025 in contrast to the US in 2025.

Funding reconstruction in Ukraine and Middle east. More Europe and Japan defense spending stimulating China consumer. Okay, these are moving parts that you want to see happen. They’re not necessarily happening. Right. All right, here we go. China and Europe easing fiscal policy in 25. That makes complete sense. Right? China needs to ease fiscal policy to get out of their doldrums and Europe needs to spend to rebuild in contrast to the US and he goes on to say that funny Reconstruction, Ukraine and Middle east, more Europe. Right, More. There you go. You want to buy European and Japan defense stocks and you want to sell US Defense stocks, I guess.

I mean that’s the right. They have to build their own military now. They also again, the China part, we, they need to stimulate their own consumers. And look, I mean this is one of those any day now things. They’re going to do it any day now. Any day now. And they’ve been long China and no escalation of US China trade war and they won’t go. Okay, this is good. All right, so look, if you think China is going to stimulate the consumer, not just stimulus, but direct the consumer to go out and buy, I don’t know, put a gun to their head, give them cash, give them a coupon, you know, to buy telephones, I don’t know.

But they need to get Chinese consumers consuming or alternatively you need to get the rest of the BRICs to buy their goods at the same price that US consumers buy their goods and that’s not happening tomorrow. They need to consume what they make. All right, Hartnett says that he is long China on no escalation of US China trade tech war. That’s right. He’s saying based on, I think based on what just happened with Mexico and Canada that Trump has no business, is in no position and probably no real desire to get into a balls to the wall trade war with China yet.

All right, he won’t go long Japan until Nikai can prove it can rally with a stronger yen. Okay, so American exceptionalism, right? I defined it as stocks going up with the dollar going up. He wants Japan exceptionalism. He wants the Nikkei to go up as its currency strengthens. That means fiscal responsibility by the way. It should anyway, long Europe but expect profit taking on February 23rd German election and February March Russian, Ukraine peace talks. Okay, there you go. That’s it. Next paragraph. I’m going to try and move quickly through this because I’ve touched on many of the points that he makes because he’s made them more than once.

So I don’t have to touch on them, I don’t have to make them again, hopefully. All right, the trade war won’t end. A 2025 bid for international meaning the trade war that we are in now or on the cusp of being in now won’t end the bid for international stocks. Yes, implementation of US tariffs which are now delayed on 1.4 trillion of China, Mexico, Canada imports would have caused a spike from 2% to 6% in US duties as a percentage of imports. Chart 9. And yes, backdrop, the global backdrop is more vulnerable to a big trade war in 2025 than in 2018.

And also, yes, backdrop is more vulnerable to a big trade war in 2025 than in 2018 when US taxes had just been cut. Global manufacturing was booming with all PMIs at 55 to 60. Table 1. Hard to say, well, let’s leave this up there. It’s better looking anyway. Okay, this, I think is, is, is, is important. The first, the first, the first half of this is I don’t believe the international stocks will get hurt by tariffs. Even though I acknowledge and I’m aware that all these things are out there now. I think this is a significant one.

The backdrop is more vulnerable to a big trade war than in 2018 when US taxes had just been cut. Global manufacturing was booming with all PMIs at high levels. I’ll tell you why in a second. I’ll tell you why right now, actually. We haven’t cut taxes yet. Right. And PMIs are in the shitter right now. Right. So essentially the US Economy is vulnerable to tariffs. Tariffs would be very recessionary. Could be very recessionary to us if they went through. It’s very recessionary for everyone else too, but recessionary for us if they went through. If, however, tariffs went into effect like in 2018, taxes had just been cut.

Right. Global manufacturing was booming, then it would just be a hiccup. I think that’s one of the reasons that Trump knows, you know, channeling Besent’s advice, knows that he shouldn’t be, he shouldn’t be pushing hard for tariffs right now. All right, so moving on to that. Oh, I’m sorry. So. And yes, backdrop, more volumes of big trade episodes. As I just said, inflation was no threat. CPI averaged 1.5% since the Great Fed financial crisis. Tech was less dominant. We weren’t as crowded in our trading. Magnificent Seven was only 15% of the S&P 500 versus 33% today.

So all these three. Three, all these things are indicative with counterpoints of the tariffs ending international stock bids. And here’s where the. Here’s why I’m not worried about it. Today’s reality in 2025 is that there are two trade wars. The real strategic one with China and the tactical ones with everyone else. The tactical ones are what his version of, hey, that’s for show to gain weight when he negotiates with China. And it’s good to see this. I’m not crazy. Anyway, there are two trade wars. There’s China and the tactical ones with everyone else, ladder to remain transactional and too much for us and China to lose with big escalation of a US China trade war.

Okay, the other trade wars, the tactical ones, are to remain transactional, meaning they’re not going to be complete universal. There’s probably going to be this industry versus that industry and it’s going to be transactional. It won’t be it. It’ll be backroom negotiating. And he believes that China and the US Both know that there’s too much at risk for US and China to lose with big escalation of U. S. China trade war, for example, it will be a political misstep for Trump to allow a second wave of inflation. China is less reliant on US Exports and neither side is likely to pursue a mad tech war.

Mutually assured destruction. US allies control greater than 90% of the global semiconductor manufacturing. China extracts 60% and processes 85% of world’s rare earth minerals. So look, it’s mutually assured destruction. If we go all out entire floor with each other, we control 90 greater than 90% of global semiconductor manufacturing. Even allowing for whatever it else is China’s doing. They’re not telling us about China. It’s still a big deal. China extracts 60% and processes 85% of the world’s rare earth minerals. They have the supply chain, you know all that lithium that’s coming out of the ground, they have the process refined.

They’re set up for it. That’s why they’re doing, that’s why they’re taking all the silver as a concentrate, because they’re making it into a finished product or usable finished product, I should say. So Mutually assured destruction. China and the US know that they’re the big boys on the block. And while they may spat publicly, they know that it’s kind of like nuclear detente. If one of them goes full tariff, then the other goes full tariff and that’s global recession. And global recession. Side note, global recession is why world wars start. Global recession means someone, some small country out there suffers irreparably and that’s where the war starts.

Like a Serbia. That’s it. I mean back to gold, if you don’t think. I don’t mean to be accusatory. I think it’s insane to think that China and the US are not both working together in some way, shape or form to allow the price of gold to rise to a level that they can both agree on. They’re both cheating, okay, but they both know they’re cheating and they’re just cheating and hope they don’t get caught by everyone else. Okay, They’re China’s buying more than they’re saying China’s doing things to cook the price higher. We’ve been cooking the price lower for years.

We’re buying without talking about it. This recent thing going on, it’s a big deal, you know? Do you hear China talking about it? No. Because they’re in on it. Everyone’s buying gold. Everyone. Look, this is a world divorce, right? And the divorce. Everyone’s separating the assets. This is yours, this is mine. And every so often, there’ll be a problem and we’ll have a debate and we’ll have a discussion. I wanted that chair. That’s an heirloom. Okay, well, you can have it. But I get this. And this is a divorce. Okay? Separate but equal. However you want to look at it.

And that’s basically it. I think Hartnett is bullish miners. How could you not be, based on what he said? All right, let’s go through the actual report so you guys can see it all. All right, there’s the first page. Set work. You can see all my lovely notes there. These charts are all included. Some more notes. I’m waiting for this to be featured again. When the streams cross. And there’s the quilt of returns. Let me do this one more time in a more. There’s the home page. Okay. I’m Vince. Have a great day. Well, thanks for watching this morning’s Markets and Metals with Vince Lancy.

We sure appreciate you tuning in and stay starting your day with us here. Hope you enjoyed the show and we’ll see you again tomorrow. Please note that this video is not intended as legal, licensed financial trading advice and is to be used for informational purposes only. Please contact your financial advisor before making any decisions. And thanks for watching.
[tr:tra].

See more of Arcadia Economics on their Public Channel and the MPN Arcadia Economics channel.