Possible ‘Painful’ Times Ahead, Macro Guru Raoul Pal Says
In last Friday’s daily briefing on his Real Vision channel, Macro guru and financial expert, Raoul Pal, told his viewers to expect ‘painful’ times ahead as global markets are stuck in a mass liquidation phase.
Not expecting a turnaround in the short term, Pal notes that while it does not matter what your portfolio is made up off, it will likely only be the US dollar that can remain strong.
“This is an ugly market. What I think is going on here is there are two factors for the market to digest. One is inflation, and that created the market to set up in certain ways. Everyone’s crowded into certain things. Then, growth starts evaporating. You can see it all over the place, stuff like consumer discretionary stocks. You can see it in the forward-looking indicators.
So the market has to deal with inflation plus [slowing] growth, and what that basically means is everyone’s hit the liquidate button. So everything’s getting liquidated. This is the correlation of 1-star markets that I was warning about. And it hits everything from crypto to pretty much everything and the thing that stands above all ends up being the dollar. Because that is the kind of safe haven… We’ve seen some huge moves in the dollar, and I’m not sure it’s entirely done yet.
There is a massive liquidation going on as people struggle with their portfolios because basically whatever position you’ve got, it’s wrong. And that’s the pain everyone’s gonna have to take for a while.”
Pal expects that eventually cryptocurrencies like Bitcoin, growth stocks and gold will be benefiting as inflation come down in the coming months, however much depends on what central bank’s will action:
“If I’m right and that inflation story is going to change and growth is going to go slower, then we start shifting into a dynamic where we question what the central bank’s going to be doing. And if bond yields are going to come lower, stuff that’s been really beaten up like the further end of the growth stocks, they should be more interesting in that environment because they got killed by inflation.
I think gold does pretty well. Interestingly enough, gold and growth stocks tend to do badly as real rates start tightening. But they got to zero and it looks like the world’s falling apart just as the central bank is trying to undertake quantitative tightening or at least no QE. And if that’s the case, then real rates are going negative again. If I’m right, that’s usually good for gold, crypto, long-end of growth, that kind of stuff, and bad for everything that people have been in like commodity stocks.”
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Author: Peter Siu