• Clifford Bennett, Chief Economist at ACY


• 11.01.2022 12:00 pm
#stocks , Clifford Bennett has over 36 years of market trading experience and was named the 'World's most accurate currency forecaster' by Bloomberg New York. He has advised some of the world's largest organisations, billionaire investors, and political leaders and spoken at the prestigious APEC summit on reserve currency issues. Clifford is the Chief Economist at ACY Securities.

Don't forget the Putin Wild Card?

Photo: Kremlin.ru

When it comes to strategic brinkmanship you would be hard pressed to find a better player than President Putin.

Having been in the same room as Putin as he answered a barrage of western journalist questions, I do not envy any of the negotiators currently involved. Forecasting an outcome in the current situation is most definitely fraught with danger.

Russia has amassed the necessary forces to be militarily successful.

The US has said it will not militarily intervene.

Europe has said it doesn't want too harsh sanctions so as to keep its vital gas supplies flowing.

This leave Putin with the choice of what he can get from negotiations verse a military win.

Either way he has shown he is prepared to move and is a major power to be dealt with. His desired reassertion of Russia as an equal super-power continues. We should not assume the market perceived outcome of a solution being found as being the eventual outcome.

Even then, in his final speech at APEC 2012 he singled me out and said, “you know that currency guy, well, he got it wrong”. Referring to my address and forecast of three equal reserve currencies, USD, EUR and Yuan, that I was wrong because there would be four equal reserve currencies including the Ruble.

Not just Putin, but the Russian people feel strongly about Ukraine.

This is a low probability wild card possibility, but it is one the market is completely unprepared for.

Life in the 20s. Hiding from Omicron.

Photo: WSJ.com

Fed Chair Powell declares he will not allow inflation to become entrenched....

Too late!

what the consumer thinks

US Inflation Expectations

Consumer expectations remained firm on the day at an incredible 6% for the coming year. This matters because households will be adjusting their behaviour based on this kind of outlook.

A big belief was that property prices would continue to rise. That may prove wishful thinking. Property prices in the US are truly already over-heated. It is from rent increases, pushed to fund rising mortgage rates and early withdrawal from the workforce, that inflation may gain further traction and acceleration.

It is almost laughable how long it is taking the big banks and institutions to understand the foundational driver of inflation this time round is coming from freedom of pricing/profit gouging, and this is why earnings are strong.

US Inflation This Week

Thursday will see the release of the latest inflation data and the market consensus is for 7.0%. This is a consensus of the very same people who said inflation was transitory and had absolutely peaked back at 5.4%.

We continue to see higher inflation on a trend basis, but the numbers will jump around a little. The most important aspect fo all this is that anything above 4.5% represents extreme long term economic damage to the economy. We have been well above that level for quite some time.

This does stand to be a very market moving event.

Anything at or below 6.8%, could be mistakenly seen by the market as the peak. Especially, as Fed Chair Powell is now positioning himself as a champion against inflation. After being completely and utterly neglectful of the situation for the past 18 months. The market could take the twin false beliefs, that inflation has peaked and Jerome Powell can do anything about it to substantiate further significant buying.

At 7.0%, or slightly above, and we could see confirmation of the major top in equities I keep touting to you. To be fair, we have been getting right in that regard of late.

US Stocks remain at risk of major highs being put in pace amidst the current turbulence. The Nasdaq just fell 2.5% and rallied 2.5%, in one day. This is extreme, even by extreme market standards.

High volatility is often a characteristic of major turning points. Not all are exhaustion phases. From a technical perspective it is still too early to say, but fundamentally, that earnings gains have come from inflation generating price gouging should be of concern to everyone.

Euro Un-Employment

Finally, after a two year extreme detour, the jobs situation in Europe is approaching pre-Covid elevens. This is a very positive sign indeed, but look more toward stabilisation than any sharp further improvement. Nevertheless, this is the way of Europe and suggests some return to a more normal normality, than perhaps is the case in the US.

Clifford Bennett

ACY Securities Chief Economist.

The view expressed within this document are solely that of Clifford Bennett’s and do not represent the views of ACY Securities.

All commentary is on the record and may be quoted without further permission required from ACY Securities or Clifford Bennett.

This content may have been written by a third party. ACY makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied by any third-party. This content is information only, and does not constitute financial, investment or other advice on which you can rely.