Julian Brigden: The Catalyst for a Powerful Metals Bull Market is in Sight

Tom welcomes back Julian Brigden, co-founder of Macro Intelligence 2 Partners, about the current economic condition referred to as 'macro purgatory.' Brigden warns of an impending recession following a tightening cycle, with only an 8-10% chance of a soft landing. He underlines the significance of employment data, specifically unemployment rates, which can precede a recession and could result in significant rises, potentially causing bond markets to rally while equities weaken. The Fed's failure to meet its stated goals complicates matters as Treasury and Janet Yellen have counteracted their efforts.

Brigden discusses his perspective on inflation trajectory over the last few years and identifies significant factors such as the breakdown of globalization, a resurgence of the cold war, demographic changes, and the impact of COVID-19. He explains that goods inflation is at its second lowest level in 65 years, while core services remain high. If core service inflation does not decrease significantly, it could indicate weakening wages and lead to recessionary signals despite falling inflation rates.

The challenges faced by the Fed in making monetary policy decisions due to lagging and imperfect metrics like employment data, GDP, and CPI are also discussed. Julian expresses optimism about precious metals as a potential investment during this economic period.

Brigden shares his perspective on investment strategy shifts towards precious metals, emphasizing the significance of recognizing market weakness and the Fed's response. Julian also mentions the historical trend of investors being fully invested during strong markets, leading to a lack of liquidity during downturns, and discusses potential impacts on bond yields when the Fed inevitably intervenes. Additionally, he touches upon geopolitical risks such as uncertainty surrounding the next U.S. presidency.

Timestamp References:
0:00 - Introduction
0:40 - Macro Purgatory
5:10 - The Fed Vs. Treasury
7:46 - Goldilock Periods
13:08 - Inflation Calls & Factors
21:30 - Fed & Curbing Labor
25:53 - Lagging Metrics & Politics
34:26 - Markets & Pricing Concerns
41:00 - Metals & Low Liquidity
43:47 - Metals Potential & ETFs
49:13 - Miners & Capital Rotation
53:45 - Risk Vs. Returns & PMs
58:24 - This Time is Different
59:58 - AI Usefulness?
1:01:07 - Fed Cuts & Bonds/Dollar
1:07:00 - Wrap Up

Talking Points From This Episode
- Brigden predicts an impending recession with low chances of soft landing; employment data is crucial.
- His thoughts on what may spark further interest in miners and metals.
- The Fed's failure to meet goals complicates matters as Treasury and Janet Yellen counteract efforts.
- Core services inflation could indicate weakening wages, leading to a potential recession despite falling rates.

Guest Links:
Twitter: https://twitter.com/JulianMI2
Website: https://mi2partners.com/
Substack: https://mi2partners.substack.com/

Julian Brigden is the Head of Research at Macro Intelligence 2 Partners, a firm he co-founded in 2011. He leads a six-person team of research and market professionals to publish independent macroeconomic research that is both ahead of market consensus and timely. Julian has over 30 years of experience in financial markets including positions in market and policy focused consulting to institutional investors as well as FICC sales.

Julian is a trusted advisor to many top money managers who use MI2 Partners’ research to guide their investment process. He has extensive experience with macro data analysis, broad fixed income, equity market (not individual stocks) and currencies. He is particularly skilled at exploring correlations in the economy and financial markets vital to a vast array of investment decision-makers. As a global macro strategist, Julian’s primary focus is understanding and explaining macroeconomic and policy-related developments to tell clients what is important in markets and what to fade.

When asked about his market outlook for 2022, Julian stated that the US policy response was massive. As a result, the economy has closed the output gap and is in danger of overheating. Together with inflation, Julian believes that this means the Fed needs to rapidly tighten policy while slowing growth. As rates rise and the balance sheet shrinks, the risks to very overvalued asset prices, especially stocks, will rise. He then stated that in Europe, as the impact of Omicron fades and the inventory cycle surges, the ECB will need to raise rates, which will add to the pressure in global bond markets.

With regards to market shifts and the issues he feels are not addressed in the media, Julian mentioned that there is a significant risk that we are entering a period of extended volatility. The most analogous period was in the late 1960s, when we saw greater economic and market cyclicality. As foreign interest in Treasuries has waned, he believes that the current US account deficit has been funded via purchases of equities. Thus, if US equities do correct, it could put considerable pressure on the dollar. With this in mind, Julian says that the MI2 Research team will continue to advise clients to be short fixed income in the US and Europe, together with high yield credit. Finally, they have suggested being long volatility in a few places.

Julian spent five years at Medley Global Advisors from 1999 to 2004, a leading macro policy intelligence firm, as the Managing Director of the G7 Client Team, providing timely trading recommendations. From 2004 to 2011, he served as North American Head of Hedge Fund Sales at Crédit Agricole. He has worked in London, Zurich, New York and Vail at UBS, Lehman Brothers, HSBC, Drexel, Credit Suisse, and Salomon Brother in foreign exchange and precious metals.

Throughout his career, he has been featured on many big media outlets such as Bloomberg, CNBC, Fox News Business, Real Vision, the New York Times, Wall Street Journal, and Barron’s. Discussing macro research topics that are driving prices in global bonds, equities, commodities, and currencies.

Julian Brigden, Macro Intelligence 2 Partners' Head of Research, co-founded the firm in 2011 with a team of six research and market professionals. With over 30 years in financial markets, he guides clients with independent macroeconomic research. A trusted advisor to top money managers, Julian specializes in macro data analysis, fixed income, equities, and currencies. He focuses on understanding macroeconomic and policy developments for investment guidance.

Prior to Macro Intelligence 2 Partners, Julian spent five years at Medley Global Advisors as Managing Director of the G7 Client Team. From 2004 to 2011, he served as North American Head of Hedge Fund Sales at Crédit Agricole. He has worked for various firms, including UBS, Lehman Brothers, and Salomon Brothers, in foreign exchange and precious metals.

Julian's career includes appearances on Bloomberg, CNBC, Fox News Business, Real Vision, the New York Times, Wall Street Journal, and Barron’s, discussing macro research influencing global bonds, equities, commodities, and currencies.