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Tag: Barry Knapp

Cyclical Stocks to Outperform as Inflation Drops to 3.5%: Barry Knapp’s 2023 Outlook (Szn 5, Ep. 1)

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Barry Knapp of Ironsides Macroeconomics rejoins the podcast to discuss his surprisingly sanguine view of the economy in 2023: Why cyclical stocks should outperform the technology and defensive sectors, and why he’s expecting inflation to drop to 3.5% by the second half of the year.

Content Highlights

  • Inflationary recessions are different from deflationary ones. The last four were the latter. If there is a recession this year, it will be the former (02:18);
  • Earnings downside is limited in this scenario, by 5% based on what happened in similar situations in the past, and earnings should actually go up (5:56);
  • Tech margins should continue to be under pressure but economically-sensitive cyclical stocks should see margin expansion (10:50);
  • The US labor market has actually started to weaken considerably — and not due to Fed policy (12:18);
  • There have been some big adjustments in the labor market post-pandemic (16:47);
  • The ‘wealth destruction effect’ from tech stocks selling off is negligible (27:35);
  • One point of concern: the deficit. This is where the implosion in wealth could affect things (32:59);
  • The coming budget battle in Congress is worth paying attention to (34:41);
  • The ‘higher for longer’ Fed interest rate hike thesis has gained traction. What this means for stocks (43:27);
  • Inflation: Expect 3.5% CPI by mid-year (47:37).

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Not intended as investment advice!

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Szn 4, Ep. 1: Barry Knapp on Uncertainty Shocks, Inflation, Economic Growth, and What Else to Expect in 2022

Barry Knapp of Ironsides Macroeconomics rejoins the podcast to discuss his 2022 outlook for the economy and markets. He is broadly optimistic on the former, but less enthusiastic about the latter — at least in the first half of the year — with strong possibility of ‘uncertainty shocks,’ especially around Fed events (sound familiar?) There is also some interesting discussion around interest rates, inflation, and China, among others.

Content Highlights

(Spotify users can link to the start of the section by clicking on the timestamp)

  • A lot has changed in a year, though probably nothing quite as much as the inflation outlook (3:04);
  • Markets and economics should diverge significantly in the first half of the year (4:51);
  • The Federal Reserve is due to embark on a rate-tightening cycle, which should be negative for markets but will be net-neutral, or perhaps even positive for the economy (8:00);
  • Inflation is running hot, but the guest has done some deep research on similar historical epochs and finds the concern less pressing than most (17:20);
  • The key level for inflation is 4% — if the CPI exceeds it consistently there could be trouble. Link to the Fed paper referenced here (21:33);
  • Still, there is a strong possibility for ‘uncertainty shocks’ in the first half of the year (29:52);
  • Finally, China: Reasons to be bearish. Very bearish (34:58).

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Season 3, Episode 1: The Biden Administration and Risks to Global Growth

With Barry Knapp, Ironsides Macroeconomics

Barry Knapp of Ironsides Macroeconomics rejoins the podcast to discuss his view on “policy tremors” that could upend economic and risk asset growth in 2021.

(Barry’s dog Oliver makes a brief appearance as well).

Content
(Spotify users can skip directly to the segment by clicking on the timestamp)
  • The current reflation theme is part of a recovery from what was actually a two-year recession in global manufacturing, trade, and capital spending (4:19);
  • The Federal Reserve will initially be pleased with rising inflation, having slayed the deflation boogeyman. This will eventually morph into discomfort (first from regional bank presidents) and concerns that inflation is moving “too far, too fast” (11:43);
  • Once this happens, Fed officials will begin discussing “policy normalization” and real rates will start to move, triggering a risk-off event (13:19);
  • The Georgia elections the first week of the year were a kind of “sneak preview” of this event, but look to mid-year for the real McCoy (16:37);
  • Another important indicator: Watch house prices through the spring selling season (20:40);
  • Two details of President-elect Biden’s $1.9 trillion stimulus proposal that are not fully appreciated by the market (21:41);
  • The Democrats will likely ask for more than Republicans are willing to give, triggering reconciliation that would be a rude awakening for the market (28:38);
  • If the $1400 stimulus checks go through it may lead to another “speculative blow off” (30:50);
  • There is no indication President-elect Biden is willing to roll back tariffs on China, though he could re-engage in TPP. But anybody expecting a broader unwinding of the trade war “is pretty off-base” (33:00);
  • Look for further USD weakness, particularly against the yen and the euro (37:57);
  • Favorite asset classes for 2021 (41:09)
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