Investors turned their attention to the bond market this week as yields on long-dated U.S. Treasury bonds hit multi-year highs. The government needed to step in to curb what looked like a rout in both stocks and bonds.

 

Mid-week, the 30-year Treasury bond, as well as the benchmark 10-year, fell in price as yields hit 5.24 percent and 4.74 percent. To stem the fall in bond prices, U.S. Secretary Scott Bessent announced Wednesday morning before the open that he would double Treasury bond purchases beginning in September.

 

Both bonds and stocks rallied on the news, but by Thursday, bond yields rose again, and stocks fell as traders doubted the impact of Bessent's new measures. Aside from reducing the pace of higher yields (which it did), they figured that buying back some bonds would not do much to stem the fundamental reasons for the climb in interest rate yields.

 

Higher oil prices, higher inflation, higher deficits, higher debt (now $40 trillion), and no end to government spending made the move's impact no more than a pimple on an elephant's derriere. But the announcement did force the dollar lower (as intended). So far this quarter, the dollar has declined 2.5 percent; that's a large move in the currency world.

 

What it did do was convince investors that with this attempt to force interest rates down, inflation could be here to stay at least for the foreseeable future. That caused a spike in the prices of inflation hedges like gold, bitcoin, and most other commodities. Right now, the negative correlation (one goes up, the other goes down) between the U.S. greenback and gold is above 90 percent, while bitcoin's correlation is roughly 83 percent.

 

Gold gained more than 4 percent on the dollar move, while gold mining stocks posted high single- and double-digit gains. Bitcoin climbed much more than that, although some of the gains were attributed to the president's attempt to jawbone Congress to pass the much-delayed crypto Clarity Act legislation. What Trump didn't say was that the delay is largely due to concern that passing the legislation (as is) would allow politicians to benefit from their existing crypto investments. Read the president and his family and friends.

 

In another TACO moment, the president's tariff tantrums against Canada have come to naught (surprise, surprise). As for the Middle East, markets have tuned out the meaningless stream of assurances on Truth Social just like they have on the tariff diatribes. Oil moved higher this week as investors realized that there will be no grand Hormuz openings. That adds to the inflation story, which fuels the rise in long-term bond yields and is a large reason why we are seeing gold, other precious metals, and commodities in general come back to life.

 

Gold has broken out of its range and is now above $4,500. Energy has quietly become the strongest performing sector so far this year, substantially beating technology with far less attention. Keep your eye on those soft commodities as well. The combination of less fertilizer flowing out of the Middle East, climate change, and my prediction of a Super El Niño beginning next month ( see my column "El Niño Is Flashing Red Light for the World") is boosting prices in wheat, corn, sugar, etc.

 

As for equity markets overall, August is off to a positive start, but stocks are beginning to wobble. This week the S&P 500 lost 1.5 percent while Nasdaq fell almost 2.35 percent. In the coming week, we have Nvidia's earnings, and the Jackson Hole boondoggle — the Economic Policy Symposium of central bankers on Aug. 28. Investors are hoping the keynote speaker, Fed Chairman Kevin Warsch, will share his view on long-term bond yields and the move by his fellow former hedge fund manager, Scott Bessent.

 

A big reason I have been cautious on the markets in August and September is the upcoming midterm elections. Consider this: in the last three midterm election years, the stock market has declined by at least 10 percent beginning on Sept. 19, 2014, Sept. 20, 2018, and Aug. 16, 2022. Coincidence? Possibly, but three in a row does make a trend. History is only a guide, but in this case, I'm listening to how it rhymes with the past.

 

The U.S. and Mexico are the only countries out of 19 other OECD countries where a substantial portion of the population lacks any form of health insurance. In the U.S., about 8 percent of the population, or 27 million people, are uninsured. That number is about to grow larger.

 

That data is part of an independent research study conducted by The Commonwealth Fund, a private foundation. And that is despite the U.S. has spent more on health care than any other nation. In 2024, we spent 18 percent of gross domestic product on health care. That is nearly two times as much as the average OECD country.

 

Over a year ago, the Republican led U.S. Congress cut healthcare spending by cutting public subsidies for private health care insurance which caused millions to lose healthcare coverage. While on paper the savings seemed justifiable, in reality the cuts have just shifted the burden of paying for the uninsured patient to the hospitals, and ultimately, the taxpayer.

 

Before you ask, the Emergency Medical Treatment and Labor Act mandates that hospitals provide treatment to patients with emergency medical conditions, regardless of their insurance status or ability to pay. This federal law was enacted in 1986 to prevent patient dumping, where hospitals would refuse treatment to individuals based on their inability to pay or lack of insurance. This places hospitals and other health care clinics in harm's way.

 

This is not some dire predicament that may happen in the years to come. Some for-profit hospitals are already reporting a 20 percent increase in uninsured visits, and one company is expecting as much as $1 billion less in profits for this year. And the administration is only getting started.

 

As part of the "Big Beautiful Bill," the administration and Congress are cutting an additional $625 billion in Medicaid over 10 years. The CBO estimates another 7.8 million people will become uninsured as a direct result of these changes. That would bring the total number of newly uninsured Americans to almost 17 million.

 

And the trend is not your friend. Baby Boomers of all income levels are retiring and will need increasing healthcare regardless of their ability to pay. If you look at the demographics, those most impacted by these changes are low-income adults in Medicaid expansion states. Young adults (ages 19-34) will be hurt as well. To put that in perspective, that's 3 in 10 Gen Zers who are vulnerable, according to the Urban Institute. People with disabilities who do not qualify for federal disability benefits (2.6 million), and rural residents, where it is estimated that $155 billion in reductions of Medicaid spending will occur.

 

In 2025, the federal, state, and local governments collectively spent $30.6 billion to cover the medical costs of uninsured patients, according to recent government studies. The total cost to taxpayers is higher when you consider uncompensated care costs. Each newly uninsured person can generate as much as $900 in lost revenues for hospitals, two-thirds of which translates into loss profits. Uninsured patients frequently pay 2 to 5 times more for care than insured patients. And that was before the ACA reductions and the expected cuts in Medicaid coverage.

 

In this era of populism, where the GOP majority is already razor-thin, some might think that this kind of legislation is tantamount to political suicide. It would be, but politicians are a crafty lot. Most of the cuts in Medicaid will only become law after the midterm elections this year. In which case some of the base that Republicans depend upon the most to deliver a majority in Congress in November won't realize the devastation to their well-being until it is too late. I won't mention the potential loss of life involved since some might accuse me of valuing human life more than money.

 

Hospitals and emergency rooms will continue to absorb rising uncompensated care from a combination of state-directed payment cuts, much higher charity care, reduced Medicaid/ACA funding, and limited stopgap state programs. Some will attempt to pass on those higher costs to you via increased premiums on your own health care. Others will need to apply to the government to bail them out. In which case, you, the taxpayer, will pay for those bailouts as well.

 

Our healthcare system is a wreck. The U.S. has one of the lowest rates of physician graduates and the lowest rate of primary-care physicians per 1,000 people. Americans also have one of the highest rates of dying prematurely where men are more likely to die from avoidable causes than women.

 

The U.S., on average, has the poorest health outcomes of any high-income country, according to The Commonwealth Fund. The May 28, 2026, paper "U.S. Health Care from a Global Perspective, 2026" argued that a "Lack of universal coverage, weak primary care infrastructure, high out-of-pocket costs, and a complex insurance system contribute to and exacerbate the nation's uniquely poor performance relative to its peers." I couldn't have said it better.

 

It wasn't difficult to predict that this week's July inflation data would be cooler. Last month, oil declined on the unfounded hopes of peace in the Middle East. That showed up in the numbers, but what about next month and beyond?

 

Oil is trading at $80-$82 a barrel. That is up more than $4 from July 1, 2026, or almost 5.5 percent. As such, I expect the August Consumer Price Index and the Producer Price Index to be higher than the results reported for July. And what happens if the Straits remain closed? Could we see $85, $90, or higher for a barrel of West Texas crude?

 

Nothing the Trump administration has tried has succeeded in unlocking the stalemate over the Straits of Hormuz. Intelligence assessments over the last few weeks indicate that without boots on the ground, the Navy could not open the Straits on its own. A land invasion would be difficult, if not impossible, and the severe loss of life unacceptable.

 

So, both sides are now playing a waiting game. The U.S. is applying continued economic pressure to Iran, hoping to force the hardline leadership to cave. The Iranians, long accustomed to economic pressure from the West, seem undeterred and have developed ways to grow their economy despite sanctions.

 

The regime has also become more entrenched thanks to the invasion. Rather than accede, they are content to use delaying tactics at the negotiating table while demonstrating their ability to strike militarily whenever they want. They know that the longer oil prices remain where they are or higher, the more likely it is that winning the mid-term elections will be difficult for Trump and the Republican Party. That could lead Congress to force an end to the war.

 

Given this background, why haven't we seen even higher oil prices? One reason is that oil demand is declining according to both OPEC and the International Energy Agency. The other reason could be that more oil is making its way out of the region than is reported. By some estimates, as much as 16 million barrels per day is making its way either through the Straits or through regional pipelines. That compares with approximately 20 million bbl. per day before the conflict.

 

Understandably, the U.S. financial markets have lost faith with constant U.S. assurances that a deal is right around the corner. We are in the ‘show me or shut up' stage of the war. Until there is a definitive opening of the Straits with tankers traveling through the passage at a pace like before the U.S. attack, the oil price will remain higher. How high that risk premium will go is at this point up to the Iranians.

 

The new CPI reading of 2.5 percent, higher than the inflation rate last year at this time but only a monthly gain of 0.2 percent from June's number, was in line with my forecasts. It seems clear to me that Wednesday's numbers were leaked. All the asset classes that would benefit from a weaker CPI number were up substantially well before the 8:30 a.m. data release.

 

The Producer Price Index was unchanged from June. From here, inflation moves higher in my opinion. As for the string of good inflation numbers we have had lately, I suspect the data will not sway the Fed members from their watch-and-wait stance.

 

Kevin Warsh, the new chairman of the central bank, has already said, "I do not find the current Fed policy of ‘data dependence' of much real value. We should care little about two numbers to the right of the decimal point in the latest government release." However, the June data should put to rest any fears that we will see a rate hike at the next meeting in September.

 

On a side note, readers who agree with my misgivings about the accuracy and leaking of government data should note that U.S. jobs numbers have been revised lower in 21 of the last 30 months by a total of minus-1.05 million jobs. This means an average of minus-35,067 jobs have been revised out of previously reported data each month over this period. June and May jobs numbers alone were revised down by a total of minus-103,000, the largest two-month downward revision since July 2025. It makes me doubt the trustworthiness of government data.

 

Stocks continued to climb higher on the back of the inflation data. As bets on an interest rate hike fall well below 50 percent, animal spirits are revving up, and many Wall Street strategists are talking about 8.000 as the next stop on the S&P 500 Index. Next week we could see some further consolidation before another run higher. I would buy the dip if we had a more substantial sell-off.

 

In an effort to reduce the growing expense of our nation's healthcare, Congress and the administration have cut or reduced benefits in program after program over the last year. The question they fail to answer is an important one. If health benefits are reduced, who ends up paying for all those who cannot afford it? The short answer is we, the taxpayers, do.

 

The relentless government cuts continue. In the last two weeks alone, the administration ended subsidies for Medicare drug premiums, which could impact millions of older Americans next year. At the same time, the president insisted that RFK Jr. reduce vaccinations, based on an unfounded autism link, even while U.S. cases of measles hit highs not seen since 1991.

 

Those are just two examples of a poorly understood effort to rein in burgeoning healthcare costs while expanding spending in other areas, like the proposed $1.5 trillion defense budget for 2027. Earlier this year, the Congressional Budget Office, which is Congress's official nonpartisan economic and budget agency, is forecasting a dramatic reduction in healthcare coverage not only this year but out into 2030.

 

Readers might recall the change in the Affordable Care Act (ACA) rules passed by the Republican-controlled Congress at the urging of President Trump. As part of the law H.R. 1, enhanced premium tax credits for coverage were reduced substantially. Depending on how much the insured earned, premiums for Obamacare could have doubled. As a result, more than 3 million fewer people (13 percent) signed up for health plans.

 

For those who faced these sudden charges, there was nothing beautiful about the One Big Beautiful Bill Act. Since then, there has been a concerted effort to cut even more government spending, leaving the states to pick up the slack. Between 2025 and the end of the Trump presidency, the number of people with ACA premium tax credits will fall from 20.9 million to 9.7 million (a 54 percent drop). If Congress and the White House continue along this path, the CBO projects that ACA health coverage options will drop by 44 percent between now and 2032.

 

To the uninitiated, this might sound like a great way to reduce government spending, which could be used elsewhere to reduce the deficit, for example. I only wish that were true. A look at what happens to those with no health insurance might change that view.

 

Let's say Joey, with a family of four, caught a steel splinter in his eye because of a part-time work accident. He has no insurance because he can't afford it. Joey uses eyewash, compresses, and whatever else he can muster, but the condition gets worse over the next few weeks. When it goes so bad that he misses work, he goes to the emergency room at the urging of his pregnant wife. By then, what could have been a simple procedure now requires major surgery to save the eye. The hospital bill is more than he makes all year. What happens?

 

A recent New York Times article, "Uninsured Patients Rise Sharply, Hospitals Report, Citing Obamacare Cuts," explains it all. The gist of the article is that more uninsured patients are showing up in hospitals and clinics nationwide. This is costing hospitals hundreds of millions of dollars. Any guess what the hospitals will do in an effort not to go bankrupt — raise prices.

 

I don't have to tell you that companies and individuals who have healthcare insurance are already faced with rising healthcare costs on what seems like a daily basis. What will Joey's dilemma mean to you and/or your company? You will be footing the bill for Joey's eye operation. Now, imagine the cost of another 30 million adults and children in this country who are uninsured. Those who will delay and delay until minor health issues become major and major issues become deadly.

 

Next week, I will tabulate the costs to taxpayers from those who are uninsured as well as who will be most impacted. To make matters worse, there are further reductions right around the corner that will throw even more Americans into the uninsured minefield.

 

The U.S. economy shed 23,000 jobs in July. The forecasts were for a gain of 80,000. Some workers appeared despondent while investors were ebullient as the weaker data signaled less reason for the Fed to hike interest rates.

 

Employment figures for May and June were also revised lower, with a combined 103,000 job losses more than previously reported. Readers who have read my two-part columns on government data have been forewarned to take government numbers with a grain of salt.

 

It was a somewhat dismal report where the participation rate fell to 61.4 percent; it's the lowest since September 2021. The labor force participation rate measures the percentage of the civilian population age 16 and older that is either actively working or actively looking for work.

 

It is one of the best measures of the economy's labor supply. From the data, it appears clear that the labor pool is shrinking. In which case, employers must compete harder for workers, wages rise, and that can keep wage inflation elevated.

 

In any case, the 50+ percent expectations of an interest rate hike in September in the betting markets dropped immediately with the data release. Bond yields fell, along with the dollar, and guess what skyrocketed? Precious metals.

 

That's right, gold and silver are back from the dead! This week, gold rose 7.7  percent while silver notched an 11.6 percentgain. For the most part, gold has been trading in a range for months. As oil prices gained, gold lost value. Silver fared even worse. Add in the rise in interest rates and the dollar (both kryptonite for precious metals), and it was close to a perfect storm for that asset class.

 

Now we seem to be reversing those trends, at least in the short-term. The Fed is on hold or appears to be for now, given that the last two Consumer Price Index CPI) reports have been benign. A third CPI report next Wednesday, August 12th, looks to be weaker as well. Weaker inflation numbers and now weaker job data put rate hikes on hold and may even push yields and the dollar even lower.

 

In addition, Mainland China is hoping to establish Hong Kong as a major trading market for gold among other metals. Remember, gold is entirely outside the global credit system. It cannot be frozen, sanctioned, or inflated away by another government's choices. Russia knew that and amassed its own holdings before it invaded Ukraine.

 

The People's Bank of China has been building up physical gold inventories in Hong Kong over the past several months after launching its Precious Metals Central Clearing Company. In June, they added 14.93 tons of gold. That's their single largest purchase since 2023.

 

I suspect this is adding upward pressure to the price of precious metals. They have slowly been moving their own substantial gold holdings (2,346 tons) from where it is kept in the London Metals Exchange back home to support their efforts in Hong Kong. Bottom line, Beijing is stocking the exchange it built rather than deepening the one its geopolitical rivals dominate.

 

My fears that August would turn out to be a month to be cautious seem ill-advised as we close out the first week. My caution has and will continue to be dependent on the conflict in the Middle East. In the meantime, the rotation back into technology continues. However, it is not at the expense of other areas.

 

The three major averages had healthy gains to finish the week, with the NASDAQ the winner, up 4.90 percent. The S&P 500 and small-cap Russell indexes each gained more than 3 percent while the Dow finished just shy of that.

 

Earnings results were the lynchpin of these moves. It also helped that we have seen a 9 percent decline in the price of oil. The hope that the U.S. will somehow negotiate a successful opening of the Straits of Hormuz was the flavor of the week. This could change next week; otherwise, the S&P 500 Index seems destined to make a record high.