Street Analysis

In a previous post, we discussed a trillion-dollar valuation club members of the stock market in USA. In this post, we can touch upon the height of an imbalance that we are seeing in this day and age now in many facets of our lives.

Last Wednesday, October 1, at the beginning of the new fiscal year for U.S. federal government, it effectively shut down due to funding impasse in congress. On the very same day, S&P 500 hit another record high at over 6,700 mark and the wealthiest person on this planet earth, a mercurial CEO of Tesla ($TSLA), Elon Musk, hit a $500 billion mark for his net worth as Tesla, all hot air stock, also rose along with the market.

S&P 500 has achieved about 15% gains for year-to-date (YTD) in 2025 – a third year in a row for a strong performance building onto more and more fluff for about 10 years now.

CAPE ratio also known as a Shiller PE hit 40 now, already in a dangerous territory.

Gold surpassed a $3,000 mark early this year in March and just now hit the value of $4,000 an ounce, soaring over 50% YTD 2025, an exceptionally strong performance, not a surprise, given ever-worsening fiscal and debt situation of USA.

At the same time, MSCI ACWI (All Country World Index) ex USA Index performance is about 29% gain YTD 2025 easily surpassing S&P 500 benchmark for the U.S.

However, U.S. Dollar index (dollar against the basket of foreign currencies) is down close to 10% for YTD 2025 – matching the reality of an emerging new world order.

Federal Reserve (Fed) is already boxed in with the specter of stagflation (high inflation and low growth) as covered in an earlier post, now, President of the United States (POTUS) is also effectively boxed in from the political standpoint, first-time ever, an almost unthinkable position to be in for the administration, at least for now, with the standoff between democrats (liberals) and republicans (conservatives) continuing and see who blinks first.

As a result, inherently speaking, any action by Fed or POTUS is fraught with much risk in either direction, unleashing many undesirable things.

Writing on the wall for potentially major crash, the absolute worst-case scenario, continues to be affirmed again and again with the new developments. The best-case scenario is that everything fizzles out slowly and gradually without wreaking much havoc. We can only pray for that! However, knowing the temperaments of current investor base and knowing how fickle they are as demonstrated often in completely unprecedented mega movements of the stocks, that scenario seems highly unlikely.

At the very first sign of trouble, most of this investor base with their unsteady hands, will undoubtedly try to exit out of a narrow exit door, as they have done for many solid as well not-so-solid company stocks in recent months, it will only compound the ugliness of a situation. Just as they have thoroughly enjoyed the ride on a way higher, they may have to go thru the same level of pain on a way down. Unfortunate effect of this is that the entire economy and populace suffer as the Wall Street and Main Street are, not always, though, often interlinked.

As for the most important topic of the current times, when exactly the federal government shutdown ends, already one week into it, is anyone’s guess and knowing the current stance of democrats, they are going to fight hard this time around as the healthcare is central to their philosophy and political standing, so they would not want to see the hard-won Affordable Care Act (ACA), about 15 years old, be effectively dismantled by the POTUS. Hence, the longer this shutdown lasts, worse the effects will be on the economy and the financial markets. It will be quite a painful contrast to see if this becomes a catalyst to disrupt the economy as well as the markets in a brooding landscape on various fronts.

In essence, what all of this means is that the currency debasement is well underway as flight to safe havens continue to occur for quite some time to hedge against the mounting debt of USA and not-so-small probability of some kind of a sovereign default or disruption in not too distant future. Debasement trade using gold is in vogue just as with the crypto for different reasons. Basically, we are on the way to ruins unless something changes drastically – which we have shown highly incapable of thus far for many years, if not decades already. The trajectory we are on is similar to the runaway train heading for a major crash and burn. Before it gets too late, it is a time for prudent action and wise heads to prevail in both financial as well political domains.

Also, we just witnessed the first person ever to hit the $500 billion net worth mark… and it begs a question with some philosophical implications just as the democrats, especially the progressive wing, often bring up; shall billionaire exist? Is trillionaire even a possibility? Amen!