Growth Scare Hits U.S. Economy | Barry Knapp on Fed’s “Quadrilemma,” Lehman Brothers, and Job Market

Speaker 0: Forward guidance is brought to you by VanEck, a global leader in asset management since 1955. You'll be hearing more about a VanEck ETF later on. But for now, let's get into today's interview. Very pleased to be joined by Barry Knapp, founder and CEO of Ironside Macro. Barry, great to have you here.

Welcome to forward guidance.

Speaker 1: Thanks for having me.

Speaker 0: We record the afternoon of, Thursday, June 6th, and tomorrow, we get our our big jobs market data. But over the past week, I think there's been a little bit of a change in the market. This is my perception. Over the past 2 years, a lot of people, myself included, were worried about a recession. The data just did not weaken.

We've had a rip roaring stock market. The unemployment rate stayed low, ticked up a little bit. So I'd say because so many of the recessionistas fears hadn't come true yet, I think there was a sense of complacency in the market and a sense of, oh, we don't have to worry about growth anymore. The economy is fine. I think there's been a little bit of a change in in the market.

So, whether it's the your last, the GP print that came out a little weaker than expected last week or on Tuesday, the job openings was 8,060,000 instead of the 8.3, 8.4 that was expected. Would you say that there's been a little bit of a change in the market, and and how have you perceived the data that's come over the past week?

Speaker 1: There's some makings of a growth scare for sure. When we started the year, I thought about and I wrote about the 2 potential disruption events to the current environment of, where the environment that we're starting to develop where we were having what I think is going to be a pretty strong capital spending cycle. There's all the makings of a secular boom in capital spending with AI being only a component of that. Right? We had a very weak capital spending cycle throughout the last day the prior decade.

In fact, the second weakest capital spending cycle since World War 2. We under invested in our capital stock. We we took changes around tax policy, a lot of the economic factors that made it attractive to manufacture goods in China and ship them back into the US. Those are really arbitrage isn't quite the right word, but those are really mitigated by mid 2,000 and, tens. And and so and now we had some catalyst for restructuring those supply chains.

So we're sort of on track for this decent path, but, to be sure, there's elements of fed policy that are restrictive, and we can talk about, you know, overall policy restrictiveness because I would argue fiscal policy is super accommodative. Fed's unconventional policy is accommodative, but their rate policy is restrictive. So when I thought about these two events that could disrupt this equity market rally and what was a pretty good bond market rally from the Fed pivot point, you know, in late October through the end of the year. I thought, okay. Well, there's 2 things that could happen.