“Protectionist trade policies as the US does, I think this is a downside risk to growth and upside risk to inflation.” – 03:03
Remy Blaire welcomes Elias Haddad, the Global Head of Market Strategy at Brown Brothers Harriman, to discuss the current volatility in the financial markets as the week comes to a close. The segment opens with Remy highlighting the fluctuating equity averages, which have been swinging between red and green due to trade tensions and concerns about bad loans from regional banks. Despite the release of earnings from major banks, some bank stocks have experienced significant sell-offs, prompting investors to reassess their positions.
Elias shares his perspective on the recent credit worries, suggesting that they appear to be more of a due diligence issue rather than indicative of a systemic problem. He cautions against complacency, noting that the market is currently frothy, with both stock and corporate bond prices being expensive. Elias anticipates a potential correction but believes that this situation could lead the Federal Reserve to adopt a more dovish stance, especially given the fragile labor market and concerns about corporate profitability due to higher tariffs. He posits that such a pivot by the Fed could trigger a rally in equity markets, despite the current concerns in the credit market.
The conversation shifts to the upcoming Federal Reserve rate decision and the significance of the Consumer Price Index (CPI) figure set to be released next Friday. Remy and Elias discuss the implications of ongoing trade tensions, with Elias explaining that protectionist trade policies pose downside risks to growth and upside risks to inflation, which are detrimental to the U.S. dollar.
As the discussion progresses, the focus turns to gold, which has recently seen a remarkable surge, breaking above significant price levels. Elias expresses his enthusiasm for gold, referring to it as “God’s currency.” He attributes its rise to declining real interest rates, fiscal concerns, and central banks diversifying their reserves into gold, particularly in light of geopolitical uncertainties.