Mike McGlone, senior commodities strategist at Bloomberg Intelligence, warned that the U.S. economy is “headed for a severe deflationary recession” and that the Federal Reserve is still tightening.” He cautions that “normally, when commodities have collapsed at this rate in the past, the Fed has already eased and is still wary about it.
Strategists say we are “headed for a severe deflationary recession”
Mike McGlone, senior commodities strategist at Bloomberg Intelligence (BI), the research arm of Bloomberg, warned in an interview on Yahoo Finance Live last week that the U.S. economy is headed for a severe deflationary recession. He explained:
I see what we are doing is heading into a severe deflationary recession, as commodities show, with the Fed still tightening.
“There is a pretty serious credit crisis going on right now, with deposits just being withdrawn from the big banks. In other words, we are just getting started. And the important thing is …… I just looked up the annual rate of industrial demand for natural gas in this country. This is the lowest it has been in the last 6 years. This is an annualized rate, so it’s not seasonal,” the strategist explained.
McGlone also cautioned that the Federal Reserve continues to talk about raising interest rates despite recent economic data. He said, “We’re starting to see a trend where both PPI and retail sales are missing expectations. And I think that is part of what happens in a recession. I think that’s the stage we’re in,” he elaborated. The market understands it, T-note yields and 10-year Treasuries understand it, but the Fed is still wary of inflation.”
The commodity strategist continued: “If you look at PPI, we’re looking at PPI on a year-over-year basis going negative by the time we get to July. And that’s what usually happens when commodities collapse,” stressing:
The Fed is still tightening. Usually, when commodities have collapsed at this rate in the past, the Fed has already eased and is still vigilant about it.
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