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In a recent episode of Palisades Gold Radio, host Tom Bodrovics welcomed back Julian Brigden, co-founder of Macro Intelligence 2 Partners, to discuss the current economic condition often referred to as ‘macro purgatory.’ Brigden warned of an impending recession following a tightening cycle, with only an 8-10% chance of a soft landing.
Brigden emphasized the importance of employment data, particularly unemployment rates, which have often preceded a recession. He cautioned that significant rises in unemployment could cause bond markets to rally, while equities weaken. The Fed’s efforts to combat inflation have been complicated by the actions of the Treasury and Janet Yellen, who have counteracted their efforts, further muddying the waters.
Brigden also discussed his perspective on inflation trajectory over the last few years. He identified several significant factors, including the breakdown of globalization, a resurgence of the cold war, demographic changes, and the impact of C***D-19. Despite falling goods inflation, core services remain high. Brigden noted that if core service inflation does not decrease significantly, it could indicate weakening wages, potentially sending recessionary signals, even if overall inflation rates are falling.
The Fed’s challenge in making monetary policy decisions due to lagging and imperfect metrics like employment data, GDP, and CPI are well-known. Despite this, Brigden expressed optimism about precious metals as a potential investment during this economic period. Shifting investment strategies towards precious metals could be beneficial, particularly when recognizing market weakness and the Fed’s response.
Brigden also touched upon historical trends of investors being fully invested during strong markets, leading to a lack of liquidity during downturns. The impact on bond yields when the Fed inevitably intervenes could also be significant.
Finally, Brigden addressed potential geopolitical risks, including uncertainty surrounding the next U.S. presidency. While the economic future is uncertain, focusing on employment data and recognizing the potential impacts of a tightening cycle are crucial.
In summary, while there are undoubtedly challenges ahead, being aware of employment data and potential market shifts, particularly towards precious metals, could be essential in navigating the current economic condition.
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