Our Co-CIOs Discuss the Different Ways the Tightening Might Play Out
November 10, 2022
Greg Jensen and Bob Prince describe how they think the tightening cycle is likely to evolve, what it means for the economy and markets, and their areas of agreement and disagreement.
In this discussion, recorded on November 7, Bob and Greg agree that the Fed needs to engineer significant weakness in demand in order to bring inflation down, and that this is likely to be bearish for equity markets, especially considering what’s currently priced. But they disagree somewhat on how the Fed will approach getting to that point. As you’ll hear, Bob sees the potential for the Fed to take its foot off the gas early and therefore need to restart the tightening cycle when it becomes clear demand hasn’t fallen enough to kill inflation. Greg thinks the Fed has already overtightened and is at risk of overtightening even further, creating a severe self-reinforcing recession.
In this discussion, recorded on November 7, Bob and Greg agree that the Fed needs to engineer significant weakness in demand in order to bring inflation down, and that this is likely to be bearish for equity markets, especially considering what’s currently priced. But they disagree somewhat on how the Fed will approach getting to that point. As you’ll hear, Bob sees the potential for the Fed to take its foot off the gas early and therefore need to restart the tightening cycle when it becomes clear demand hasn’t fallen enough to kill inflation. Greg thinks the Fed has already overtightened and is at risk of overtightening even further, creating a severe self-reinforcing recession.