Felix Zulauf: Bust/Boom Cycle Ahead As “Decade Of The Rollercoasters” Kicks Off

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At the close of the worst years for stocks & bonds combined on record, markets are trying to engineer a year-end rally to convince investors the bear market is over.

Is it?

And as we enter 2023 where is all this headed? Will asset prices shrug off the growing litany of macro concerns and recover in the new year? Or will 2023 be another bruising year for portfolios?

I can’t think of anyone better to ask these questions to than today’s expert, Felix Zulauf, owner & President of Zulauf Asset Management, who last appeared on this program in early February

& made the prediction of a 20% market correction by mid-year, which proved dead-on accurate.

Felix manages billions in assets, so he doesn’t have the luxury of an opinion without conviction. He has a strong picture of where we are in the current market cycle & is allocating capital accordingly.

Will A Fed Pivot Send Inflation Raging Higher? | Steve Hanke

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Economist Steve Hanke returns here in Part 2 of our interview with him to explain what impact a Fed pivot back to easing would have on inflation.

He also shares his thoughts on how he thinks stocks, bonds, gold and other assets should fare over the coming year given his macroeconomic outlook.

Fed To Pivot By End Q3, Likely Sooner Predicts Analyst Luke Gromen

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Article:

Past Fed Chair Paul Volker has been invoked in countless discussions surrounding monetary policy these days. Many are wondering if current Chair Jerome Powell will have the resolve to exact the Volcker-style rate hikes necessary to combat inflation.

Macroeconomic expert Luke Gromen believes that this is more about math than Powell’s resolve. 

With federal debt-to-GDP at 125% and US tax receipts, which are highly correlated with overall stock market, set to fall considerably, this is a matter of

the US government’s solvency – not the sitting Fed Chair.

Volcker lived in a different time. 

Debt-to-GDP was 30% when he began his tightening cycle. The federal deficit was around $60 billion per year (1.5% of GDP at the time). Today it is over 46x that amount at $2.8 trillion (over 10% of today’s GDP)! 

According to Gromen, the US government simply cannot fund its almost $600 billion in interest payments, the roughly $3.5 trillion in entitlement spending, and the $800 billion for national defense, without defaulting or revamping QE. In the face of historically high inflation, neither of these options bode well for the bond market.

Default, especially when it comes to domestic entitlements, is not a politically palatable position. Therefore, Gromen believes QE will return and inflation will not subside, bringing us into unprecedented territory.

Which assets will perform well under this regime? Gromen believes commodities will experience a secular tailwind and that even Bitcoin may catch a bid. To hear all his insights, listen to the full interview at the top of the page.