Gold's False Start...Housing Falls... and The Fed "Surprise"

**SPEAKER_1** (0:01)
Welcome to the Money Tree Investing Podcast. Stock market, wealth, personal finance, value stocks. Invest in your life.

**Kirk Chisholm** (0:11)
Hello, Smart Money Tree Podcast listeners. Welcome to this week's show. My name is Kirk Chisholm. I'll be your host, and today I'm joined with Doug Heagren. Hey, Doug.

**Douglas Heagren** (0:17)
Hey, Kirk. How are you doing? Happy Friday to you.

**Kirk Chisholm** (0:20)
Happy Friday.

**Douglas Heagren** (0:21)
Are you in Jackson Hole right now, like everybody?

**Kirk Chisholm** (0:23)
I wish.
One week after my vacation, two years ago, I made a thing where I go on a one-week vacation, and then next week I take off just to get situated from the vacation. This year I didn't do that. I'm feeling it. So that's a little rough, but we're making do, trying to catch up from all the action that happened two weeks ago, and then more updates this week. And at the same time, a whole lot of nothing's going on, but a whole lot's going on. So what happened this week, Doug?

**Douglas Heagren** (0:53)
Today, the big takeaway today is that the markets are now bracing for a higher-for-longer interest rate reality, following an aggressively hawkish keynote to view from Fed Share Wars. They are currently, I guess, they didn't invite you, Kirk. I thought they would ask you for your opinion. But they are at the 100th day milestone at the Jackson Hole Economic Symposium this morning. Prior to him speaking, precious metals were actually on a run. Silver broke 70 and 71 about four hours ago. And then after he spoke, he completely shattered investor hopes for a near-term monetary relief. Concurrently, global equity markets are managing a high-stakes trade with Canada and underperforming chip sectors. And we've now seen a sharp reversal on gold and silver today in reaction to his very hawkish position on inflation. He did point out that they are nowhere near finished fighting stick inflation. Core warning that July's PCI inflation index rose higher than expected to 3.7%.
And he stated explicitly that the current financial conditions are not restrictive enough and that the central bank still has a lot of work to do. They are still targeting a goal of a 2% target of inflation, but ultimately gave very little guidance or indication to anybody about how in the world they were going to achieve that. But obviously, the fact that there's not going to be this QE, the fact that he's saying that they're going to focus more on fighting inflation, that doesn't necessarily bode well for the metal and commodity bulls. So obviously, they're reacting to it and things are tanking. Is it going to stay there? Unlikely, because clearly, there's no real indication of what in the world they're going to do. They didn't come out and say, hey, we're going to spike rates. But at the same time, those odds definitely pivoted. The futures markets are pricing in a September rate hike now, but only at about a modest 35%.
And following his speech, the CME FedWatch tool saw an immediate aggressive reversal, placing a probability of September rate hike now above 55%.
He continued to reiterate his stance of keeping the central bank tight lipped, which is obviously very much against the best interests and wishes of the markets. The markets don't like uncertainty. He's advised investors they should not look to primarily the Fed for explicit market guidance moving forward.
And then ultimately, on top of that, we've got the Canada tariff war, which went in effect right before our conversation the other day. There's an economic decoupling between Washington and Ottawa that's deepened significantly this week. There's been a collapse of mid-August trade negotiations. The US did implement a 50% tariff on 20 billion of Canadian softwood, lumber, steel, and aluminum. And he escalated the feud by announcing the tariffs on all Canadian autos. Auto parts and steel will increase to 50% January 1st, 2027 So all this fun stuff that the market just loves. Now Canada said it made a dollar for dollar retaliation, so Prime Minister Mark Carney and Finance Minister Francois-Philippe Champagne finalized plans to implement retaliatory tariffs, ranging from 15% to 50% on over 700 categories, effective September 8, 2026 They specifically target our steel, our aluminum, and our agricultural products. Now I did see that Trump has come out and announced that he's sensitive to the impact of the farmer. Obviously, these tariffs are horrific for the agricultural industry here in the United States. So one thing that we've seen, and this is just my input here, Kirk, is historically Trump tends to capitulate when things get uncomfortable. It's one thing to throw it out there and announce the impact, but then when the pain starts getting felt by the American citizens, ultimately, there tends to be a moment of relent at some point. So I don't know where this is going to go. If this is Burman, I personally don't feel it's going to be, but it's definitely continues to sour this relationships. And right now, the S&P and TSX Composite Index in Canada slumped over 1% as international automakers like Ford and GM began adjusting for the reality that these vehicle exports are going to be treated with the same severity as imports from China.