Bond investors warned that the U.S. is heading toward an inevitable recession – all thanks to the Federal Reserve's continued interest rate hikes.
The investors' warnings contrasted with the Biden administration's narrative of U.S. stocks returning to a bull market, the economy outperforming expectations and the threat of an economic collapse being mitigated. Sticking to their pessimistic forecasts, they advised against hedging any bets on risk assets.
Steve Ellis, global fixed-income chief investment officer at Fidelity International, remarked he is most concerned about "something akin to a credit crunch." A report by Fortune quoted him as saying: "Central banks' continued tightening shows they're fighting last year's battle."
The outlet continued: "Ellis has built up duration risk, market parlance for interest-rate sensitive assets such as government bonds, on the grounds that when central banks are forced to switch to a pause or to looser policy, they will outperform. He sees the 10-year Treasury yield falling to three percent by year-end, nearly 75 basis points below the current level, as markets start to realize the recession will be deeper than most think.
Allianz Global Investors portfolio manager Mike Riddell meanwhile said stocks, bonds and corporate debt are mis-pricing the risks – and that only inflation-rate swaps have the economic outlook right. He continued that the so-called one-year forward inflation rate is currently at 2.4 percent, or close to two percent when risk compensation for investors is factored out. Based on this, he predicted that a "nasty recession" will occur within the next six months.
"Our base case is for a moderate-to-deep recession, and potentially crises, as the unprecedented pace of global policy tightening seen over the last year starts to really bite," Riddell said. He advised being bullishly positioned in rates and bearishly positioned in risk assets like credit.
Mannarino: Fed downplaying financial collapse as "mild recession"
Per the assessments of Ellis and Riddell, the damage from 10 continued interest rate hikes paved the way for the collapse of three major U.S. lenders back in March. SHTF Plan's Mac Slavo continued: "It was just a taste of a bigger crisis to come as central banks stay hawkish until something else breaks."
America isn't the only one feeling the crunch, Slavo added. Earlier, the central banks of Canada and Australia announced surprise rate hikes that put pressure on the Fed to follow as inflation remains persistently high.
"We're absolutely getting another rate hike," remarked capital markets trader Gregory Mannarino. "This is what they sold to the people of the world. A miracle was going to happen eventually, sometime in the future and inflation was going to come down. But it has not done that at all."
He also chided the Fed for downplaying the ongoing collapse as a mere "mild recession."
"A mild recession? Meanwhile, we just got news … that the economy is actually slowing down faster than they believed it would; with employment growth slowing faster than they thought it would really do," Mannarino stressed. (Related: Mannarino chides Federal Reserve for DOWNPLAYING financial collapse as "mild recession.")
"They want you to believe that price pressure or rising prices are slowing. But no, they are not slowing as we just found that over in the U.K., inflation [is] still surging out of control."
Visit EconomicRiot.com for more news about the imminent recession in the U.S. and other nations.
Watch Gregory Mannarino talking about about how central banks consolidatee power, sending the world into recession as a result.
This video is from the High Hopes channel on Brighteon.com.
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