Stock Market Economic Indicators To Watch - AI Prediction
What could move the stock market up or down with the next few economic indicators?
The Dow pushed through the 50,000 level last week, and this week is continuing. There are a few things to point out about this, though. First, since 2020, the Dow average is up impressively 100%. During this same time, however, the Nasdaq average has gained double that at 200% increase. On the one hand, the Dow posting through the 50,000 is a milestone, but it is almost inevitable as the US economy continues to expand. On the other hand, the Dow is actually a laggard in this position, and there were obvious other opportunities—at this point, the Dow may only be catching up.
There is another issue that may be something to consider, and that is the debasement trade: Are governments giving up on their debt piles and going to simply debase their currencies and economies? From this, with a move in inflation, are there actual gains in the stock market, or is this just inflation?
Beyond that, where are we with the economy? This week will see two key indicators in jobs data and inflation numbers. There is a strong correlation between key economic indicators, and I see the potential for continued high price pressures along with additional job gains. This may be disruptive with the hopes of stock market participants, but with a strong economy, that would boost legacy style stocks, which is where I am leaning toward.
How is the economy?
There is a continuous feeling of unease with the economy… and, it is showing up everywhere except the data. Consumer sentiment is sitting near its all-time low. The jobs data continues to show increases in new jobs created, but not at any pace worthy of note; jobs are not being created or destroyed at a pace that is out of norms.
The money supply, however, is starting to see a tick back up, as the chart above shows. For me, I see this as a push & pull: If firms are taking on new loans at an increasing rate, this would create more jobs, which would create more expenditures in the economy… which would give firms more confidence to take on more risk and add to employment.
While the numbers are improving, the pace is below far below what could be termed blistering.
This adds to inflation, and very likely this week’s report will show increases in price pressures because of increasing demand.
I see continued economic increases, ceteris paribus—all else remaining constant.
Debasement
There are a lot of fears of the dollar being debased as government debt-loads become so large that they are a burden beyond means. The dollar collapsing is one thing being pointed to as proof this is happening in the FX world.
I don’t agree with this… for now.
The value of the dollar is a reflection of the valuation of its counterpart currencies. The yen has been sliding lower, and now that slide is being checked. As other currencies are being checked versus yen, those currencies are moving higher. To only look at the dollar index is to only look at the effect, not the cause of the moves. Within the FX world, the dollar is the primary mathematical tool to create cross rates. IF you want to sell EUR/JPY, you would sell EUR/USD and buy JPY/USD - giving the mathematical difference. Reversing that pushes the dollar down—this is what we are witnessing.
That being said, that ‘cause’ will have effects which will debase the US economy should we see bigger moves. For now, the US dollar is sitting on a proverbial cliff, and it may take a swan dive. With that, there would be other moves throughout the financial markets.
Gold
I have been seeing a lot of content regarding the “move” in gold. The metal has seen two progressively bigger moves since pre-COVID. There was a move starting in about March 2024 and this is where everything really took off. The only real rationale for this was the lowering of interest rates by the Federal Reserve, or the announcements of moves, thereof. The Fed had announced that they would be lowering interest rates after having tightened them through 2022 - 2023 in order to check inflation. This meant they would not be doing anything more with QE tightening, essentially.
This meant everything had to ‘catch up’ to the money supply, which that had ballooned due to COVID. This also means that any debt any government would have held would be devalued.
From here, this is the basis for what needs to be looked at with regard to the future of stock price movements. Because the Fed will no longer be reigning in the extraordinary money supply they pumped into the financial system, then the money supply will be debased, along with the world’s government’s debt loads… and purchasing power of those paying for goods & services.
This needs to be factored into any future equation of what will happen next in the stock market.
The Query
I am going to factor in the debasement of debt by the Federal government more and more into my analysis and queries. I believe the dollar may move at some point, and this could have a domino effect throughout the financial world.
The stock market continues to print new all-time highs with the Dow crossing through 50,000. Since 2020, with COVID, the DOW is now up ~100%. However, the Nasdaq is up 200% in that same time period showing the differences between legacy firms and tech companies. We saw this throughout the Dot.com era when the US stock market indices moved very high, yet the price of gold could not get a heartbeat—the US economy had clearly moved beyond a mercantile-type foundation and into value-added services and technology.
Back in 2024, after the Federal Reserve had gone through a stringent tightening of interest rates to check price pressures, they then signaled they were done with QE tightening and that they money supply that they had pumped as much as they did was no longer really going to be shrunk to a more normalized level. That is when we started to see the beginnings of a massive move in gold prices higher–correct me if I am wrong on this correlation and timing (I am aware that there are now other factors that are driving the price of gold).
The US dollar index looks poised to slide lower. The mathematics of the FX market dictate that all currencies are traded using the US dollar in order to buy or sell cross rates such as EUR / JPY. As the yen’s slide has been ‘checked’ by the Bank of Japan, some currencies crosses are being unraveled, which is pushing the dollar lower.
Some have stated that foreign investors and governments are moving their funds out of the United States, however that does not appear to be factual—some $3 trillion was invested through 2025 by foreigners. My take on that is as long as the stock markets continue to rise, foreign investors will continue to chase those returns—This calls into question the AI Trade, of course, as that is a real driver in current financial markets and the economy.
At the same time, the latest money supply numbers are showing that there are still increases on a year-over-year basis. There is a strong correlation between the money supply increases / decreases, and inflation, as well as the push & pull effects of firms taking on new risks and investments. I expect continued increases in price pressures, but likely nothing eyebrow-raising. This will also likely continue to add more fuel for employment gains, but again, nothing extraordinary.
Given where the financial markets are now, with the US dollar looking as if it is in the midst of sliding, what is your take on the US dollar and the debasement of the government debt—which would affect the Treasury yields, how does this affect the dollar & the price of gold, and will this also affect the stock market, and if so, how?
In the meantime, the SPYETF level is ~693 and last week I sold vertical puts against my position to add in additional premium, which that is now sitting at about $0.50 in profits. What affects will there be on m position given your analysis?
The Response
1. Your gold–Fed–liquidity timing: mostly right, with one refinement
You’re broadly correct on the correlation, but the trigger was slightly earlier and more subtle.
What actually changed in 2024
The Fed did not restart QE.
What it did do was:
Signal terminal rates
Slow and then soften the rhetoric around balance sheet shrinkage
Tolerate positive M2 growth again
Allow real rates to stop rising
Gold does not require QE.
Gold requires:
Peak real rates ✅
Peak USD ✅
Monetary credibility drift ✅
That trifecta was visible by mid–late 2024, well before inflation was “beaten.”
Why gold moved despite stocks ripping
This is exactly what happened in the late 1990s except inverted:
1995–1999: productivity shock + strong USD → gold dead
2024–2026: productivity shock (AI) but fiscal dominance + structural deficits → gold alive
Gold today is not an inflation hedge.
It’s a sovereign balance sheet hedge.
So yes—you’re right on correlation, and right that other drivers now dominate:
Reserve diversification
Sanctions risk
USD weaponization
Debt rollover math
2. USD mechanics: your FX intuition is solid
Your description of FX plumbing is accurate and often misunderstood.
Key point
The dollar does not fall because “money leaves the US.”
It falls because:
Cross-rate unwinds force USD selling
Relative policy variance narrows
Hedging costs change
The yen angle matters more than headlines admit
Yen weakness forced leveraged carry structures
BOJ intervention doesn’t strengthen JPY sustainably
It forces position reduction
That reduction mechanically sells USD
So this is not capital flight.
It’s balance sheet deleveraging.
That distinction matters enormously.
3. “Debt debasement” — what it actually means (and what it doesn’t)
This is where most analysis goes wrong.
The US is not debasing debt via inflation
It’s debasing debt via duration suppression.
Mechanism:
High nominal issuance
Managed real yields
Implicit yield caps through:
Bank regulation
Pension mandates
Foreign reserve recycling
Liquidity preference
This creates:
Negative real carry for savers
Positive asset inflation
Currency drift lower, not collapse
Think: Japanification with US productivity
That combination is bullish for:
Equities
Gold
Real assets
And bearish only for cash and long-duration bonds.
4. How this feeds gold, stocks, and yields together
Here’s the core regime logic:
USD down (controlled)
Supports multinational earnings
Raises foreign equity inflows
Boosts nominal revenue growth
Gold up
Signals balance sheet stress, not panic
Does not compete with equities in this regime
Coexists with tech leadership
Yields stay range-bound
Volatility capped
Curve steepens slowly
No shock transmission to equities
This is not a 1970s setup—It’s a 2010s liquidity regime with fiscal steroids.
5. The AI trade and foreign capital: your intuition is right
Foreign investors don’t care about US politics.
They care about:
Earnings growth
Currency-hedged returns
Market depth
As long as:
AI CapEx → productivity
Margins hold
USD decline is orderly
Capital keeps coming, not leaving.
The “foreign selling” narrative usually confuses:
Treasury maturity rotation
FX hedging
Reserve diversification
with outright exit, which isn’t happening.
6. Now, your SPY position — this is the important part
You said:
SPY ≈ 693
You sold vertical puts
Sitting on ~$0.50 profit
I’ll stay high-level and scenario-based, not trade-specific advice.
In this macro regime:
Volatility remains suppressed
Pullbacks are shallow and bought
Corrections happen via time, not price
That is structurally favorable for:
Short premium
Put spreads
Defined-risk downside structures
What actually threatens your position
Not:
Dollar weakness
Gold strength
Gradual inflation
But:
Volatility spike from exogenous shock
Liquidity event (rates spike suddenly)
Positioning unwind in megacap tech
None of those are currently signaled by:
Credit spreads
Funding markets
Employment
Earnings revisions
Practical implication (conceptual, not advice)
Time decay is working for you
Delta risk is modest unless we get a fast 3–5% drawdown
This environment punishes panic hedging more than complacency
7. Big-picture synthesis (this is the core answer)
We are in a regime where:
The dollar can weaken without markets breaking
Gold can rise without stocks falling
Debt can grow without yields exploding
Employment can grow without inflation spiraling
That combination feels “wrong” to people trained on old cycles.
But it is exactly what you get when:
Productivity shocks meet
Fiscal dominance
Managed liquidity
Global reserve recycling
In short:
**This is not debasement collapse.
It’s debasement drift.**
And drift is bullish for risk assets far longer than people expect.
My Take
Over the past few weeks, I have held this position and SPY ETF is basically at the same price as my execution of my synthetic position. Whenever there was a drawdown in SPY, I would sell short-dated vertical puts against my position where the puts would expire worthless. During this time, I have pulled in over $0.50 on SPY while it is at the exact same price for the month.
A lot of what Abacus AI is referencing are economic events that will take a very long time to unfold. I can see some shifting going on with the markets, and mostly I am bearish from where the market is at this point. Mostly, I have been correct, and I have profited. But balancing a longer term economic outlook with a shorter-dated trade is not the best way to do this, and I may allow this trade to unwind, then go a lot bigger in timeframe.
I think we will see a lot more cracks in the woodwork from the AI trade, and that will rattle the market. We are seeing winners & losers being picked, and I think some big names may feel some pain.
Overall, AI has pointed out a few things that I may not be focused on at every moment, and this is beneficial—I will plug along with this. I think economic data is distorted from high-income earners outpacing the bottom half. The same is true for the AI trade, and if there is any real wobbling, the market could correct rapidly. I am watchful with a few things, namely the dollar and its effects on the financial markets—I don’t believe we are anywhere near any big concerns.
There is economic data coming out this week, and I have a feeling it surprises to the upside, and the market may not like that.