Energy Shock and Rate Hikes Could Cause a 2022 Style Bear Market | Eric Wallerstein | Clocktower Group
Episode publishedPodcast: Monetary Matters with Jack Far...Monetary Matters with Jack Farley
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A garden variety bear market, that's increasingly becoming my base case, or it's getting close to it. We're hiking into it with a supply shock. I guess I see more downside risk than the committee, and the committee says there's no downside risk to GDP. It's all upside risk. I think that without AI, more people would say that we're in substantially restrictive territory. We can't build anything that's on a data center. It's not great. Residential looks really bad. We all know that. I can't afford a home, certainly not in the on the West Side Of LA. This episode is brought to
you by Plutus. Later on, you'll hear more about how Plutus is bringing model portfolios from research providers like Citrini, HFI Research, Aurelion, LeShrub, AP Research, and Elliant Capital to your self custody brokerage account. Let's get into today's interview. Welcome to other people's money. I'm your host, Max Wheatley, and I am joined today by Eric Wallerstein, chief macro strategist at Clock Tower. Eric, thank you for joining me today.
Thanks, Max.
We obviously got the rate hike that the market had priced in. I think what was more surprising was the relatively hawkish press conference and the summary of economic projections that certainly signaled higher for longer. I mean, when you look out at what investors can expect, do you think higher for longer is what's in store?
It's coming in the near term. I'm not totally sold longer term. I mean, it was, you know, relatively hawkish in the sense that the 2028 dot moved up 50 basis points. For me going into the meeting, that was the most important thing by far. I think the market just had a totally different view of neutral than the Fed did. There was like 125 basis point gap before this meeting between what the Fed thought intermediate term neutral was and what the market had. So I thought that was really important. I guess I'm just not totally seeing the reacceleration past what happened in Q2, which was kind of a
Growth in The US, at least on on the surface, seems strong. Right? We just got a Atlanta Fed GDP now cast of, like, 5.1%. Rates historically on the long end, like, hover around, like, 50 basis points to a 100 basis points sort of, like, below growth. Like, how crazy is 5% yields in a world where growth is that strong, it sounds like you don't think that that growth will be that strong. That's why you think that that the risk is to the downside. So I'm interested in in the degree to which you think it's the strong economy that the rest of the market is seeing and and why you don't see that stre
No, it's a combination. Like, growth is good. I just think people are overreading into what is decent growth and then thinking that it's going to be great and keep reaccelerating. So if you look at PMIs, manufacturing has been much better. Bank lending's been much better. But I tie these things more to the One Big Beautiful Bill and kind of a catch up to what was a sag, especially for bank lending, post SVB and post Fed tightening. I just think people are seeing We were really downbeat in Q1. We did much better in Q2. And people think that it's gonna keep going higher. Rather, I'm looking like
Going back to Canada and what you said about their their going to hike or looks like they're going to hike despite the lack of growth, how much of that is just keeping up with the rest of the world and and the other central banks?
I think you can make a case that The US is reaccelerating. Not just good growth, but getting better. For Canada, I can't make that case. I think most would struggle to. And yet we still have the market p
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