RV Blog Pal: W-Shaped Recession Isn’t Off the Table

Pal: W-Shaped Recession Isn’t Off the Table

Your Real Vision Daily Briefing for August 21, 2020

Real Vision CEO Raoul Pal is joined by senior editor Ash Bennington to reflect on the future of markets at this unique juncture.

  • The dollar weakness phase may be showing signs of reversal, which could cause a spike in volatility.
  • The meltdown of the Turkish Lira may be buoying Bitcoin as Turkish investors seek a safe haven alternative to gold.
  • There’s no engine in global growth right now, and with the uncertainty around further stimulus in the U.S. and Europe, we could see a W-shaped recovery after all.


Get the latest information as we analyze the next phase of our new global economy and discuss what we think is to come.

A number of technical indicators are saying it may be time for a reversal of the dollar weakness phase, Real Vision CEO Raoul Pal said during today’s Daily Briefing.

Pal said that signs of reversal made a lot of other markets slightly unsettled, including gold, certain equities, and some foreign equity markets. It’s very important what the dollar does from here, Pal said. If it sharpens quickly, because of the sheer size of the positions the other way around, it could increase volatility.

Pal thinks we’ll see significant volatility in next two to three weeks as the breadth in equity market gets less and less, the dollar strengthens, we’re in a period of no stimulus, and uncertainty abounds. He said it feels like we’re getting closer to another event.

Pal also discussed the Turkish Lira and its effects on gold and Bitcoin. He said that the correction in gold this week coincided with Erdoğan’s effort to stop Turkish investors from buying the safe haven asset and also his announcement of a huge natural gas find.

But Pal also noticed a high correlation between Turkish events and what’s happening in the cryptocurrency market. He noted that Bitcoin is very well used in Turkey because it offers investors a non-manipulated form of capital flight. For those who wish to sidestep the system and avoid currency weakness, Bitcoin is the answer.

Pal said there’s strength in Bitcoin when there’s Lira weakness because Turks are flipping out into Bitcoin, letting the currency weaken, then repatriating capital should they need it, thereby circumventing falls in the Lira. They were using gold, but gold has been stopped, and Pal said he thinks the situation has been an interesting development as well as a clear use case of the new digital currency.

Pal also talked about growth during the Daily Briefing, which he said is not just not picking up, but is now weakening further.

He is very concerned that small businesses don’t have enough Fed support and they are in trouble, particularly as stimulus programs expire and cash runs out. We are at a very precarious point and we are starting to see it in bank share prices and in small business data, he said. He expects the economy to underperform expectations, as almost everyone expects a gradual return to normalcy.

There’s a story developing here of slowing growth, and it’s the same everywhere globally, Pal said. There’s no engine in global growth right now, there’s no stimulus, and we could get a W-shaped recovery after all.