Macroeconomic expert Raoul Pal said that global markets are locked in a phase of mass liquidation and do not expect a return in the short term.
Speaking in a recent interview, Pal says that no matter what’s in your portfolio, there will be more pain in the market.
Pal cites the US dollar as the only asset that can remain strong for now.
“This is an ugly market. I think what’s going on here is that there are two factors for the market to digest. One is inflation, and this has allowed the market to be set up in certain ways. Everyone is full of certain things. Then the growth begins to evaporate. You can see things like consumer discretionary stocks [in] everywhere. You can see this in the forward indicators. So the market has to deal with inflation plus [slowing] growth, which basically means everybody hits the liquidation button. So everything is liquidated. This is the correlation of the 1-star markets I warned about. And it hits everything from crypto to pretty much everything, and above all, what’s holding it in place is the dollar. Because it’s kind of a safe haven.”
Pal forecasts that both inflation and growth will fall simultaneously in the coming months. If his prediction comes true, Pal says stocks, gold and cryptocurrencies could eventually benefit.
“If I’m right and this inflation story is going to change and growth is going to slow down, then we start to slide into a dynamic where we question what the central bank will do. I think gold is pretty good. Interestingly, gold and growth stocks tend to perform poorly as real rates begin to tighten. But they’ve reached zero, and the world seems to be falling apart as the central bank tries to engage in quantitative tightening, or at least QE (quantitative easing). And if that’s the case, the real odds turn negative again. If I’m right, that’s generally good for gold, crypto, long-term growth, that sort of thing, and bad for anything people are into, like commodity stocks.”
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