Energy Shock and Rate Hikes Could Cause a 2022 Style Bear Market | Eric Wallerstein | Clocktower Group – Monetary Matters with Jack Farley

Energy Shock and Rate Hikes Could Cause a 2022 Style Bear Market | Eric Wallerstein | Clocktower Group – Monetary Matters with Jack Farley — Transcript

Market views

Bullish

KRW— Eric strongly favors the Korean won over the yen, citing Korea's AI-driven income boom from Samsung and SK Hynix, proactive government policy accepting a stronger won, and the new BOK governor's hawkish stance with government support. He sees Korea repatriating capital quickly and recycling AI income through the broader economy.
EWJ— Eric is bullish on Japanese stocks regardless of market conditions, viewing Japan as having more diversified real economy drivers than Korea's AI-dependent economy. He believes Japanese stocks will outperform in both bull and bear market scenarios.
DEFENSE— Eric likes European defense stocks as beneficiaries of fiscal stimulus, noting the sector bottomed at an opportune time this year.

Bearish

SPY— Eric sees increasing likelihood of a 2022-style bear market driven by fiscal drag, supply shock from the Iran war, Fed rate hikes into weakness, and high energy prices. He draws parallels to 2022 with energy shock, excessive valuations, and global central bank tightening.
JPY— Eric turned bearish on the yen after being bullish earlier in the year, arguing the market is over its skis on BOJ hiking expectations. He believes the Takayishi administration hasn't truly embraced higher rates and the BOJ will only hike a couple more times before pausing, keeping the yen weak as a funding currency.
EWC— Eric is bearish on the Canadian economy, noting zero growth from Q1 2024 to Q1 2025 despite the market pricing in five more rate hikes. He sees a stark disconnect between weak fundamentals and hawkish central bank expectations driven by global energy prices.
EWU— Eric is negative on European growth and rates, citing weak nominal growth, poor fiscal dynamics (especially France), high trade exposure to both China and US trade wars, and the ECB hiking into an energy shock. He sees European financials struggling if the average company's creditability falls.
RESIDENTIAL— Eric sees residential real estate as showing clear signs of restrictive monetary policy, with construction falling and affordability severely constrained.

Not investment advice.

Mentioned

Market views