Pro Macro: In Focus – 1984<2018<2022?

Published on: May 16th, 2022

Raoul’s macro framework is now nearly fully in play. In this piece he uses the parallels to 1984 and 2018 to help understand where we are in 2022. The BIG inflection is almost upon us…


  • RE
    Raymond E.
    16 May 2022 @ 20:11
    Just finished reading it and much appreciated. Thank you Raoul! Only negative is that I only found this by cruising the RV site. I still have not received an e-mail announcing that it is available. With all the excellent work that Raoul put into this, it would be hugely valuable if someone let us know that it is available. With the Flash Update last week, I didn't receive the e-mail announcement of it until the next day. Point made, and it would be good to have explicit assurances that this issue is resolved and that e-mail notifications will in future be sent (how about automatically) the moment that Macro Insiders Pro updates are made.
    • RP
      Raoul P. | Founder
      16 May 2022 @ 21:02
      Yes, last week did have an email. Not sure why but this one did, lukvily. Will follow up with the team
  • ML
    Michael L.
    16 May 2022 @ 20:51
    Thanks Raoul, I get the dipping your toes into TLT and averaging into exponential age stocks to prepare for the pivot, but would it not be lower risk to wait for the actual fed pause in June/July to buy that day? From what I can see in the past, at most you miss out on ~10-15% this way, which is arguably the minimum risk one would take by beginning to average in no?
    • RP
      Raoul P. | Founder
      16 May 2022 @ 21:01
      That is a lower risk way to play it too
    • ML
      Michael L.
      16 May 2022 @ 20:52
      Sorry to clarify by wait I mean literally hold whatever cash you would've used to average in and just buy the day the pause is announced in 1-2 months.
  • TE
    Tom E.
    16 May 2022 @ 21:14
    Thanks Raoul. Can you please expand on the final China comments?
  • MS
    Mark S.
    16 May 2022 @ 21:30
    Hi Raoul, thanks. I am wondering about certain commodities continuing to rise despite the slowing economy, so for example wheat was limit up today. Oil's chart does not look like it's coming down but rather the opposite. I realize you are looking at YoY change (double underline) which has stopped. But I am wondering about 2 things: 1) a world where certain commodities continue to rise despite a slower economy, can that exist (because of the supply constraints). I understand that people might travel less because of demand destruction, but will they eat less and will that decrease offset the demand for something like wheat? 2) a world where the economy enters recession, but commodities remain elevated and then the Fed has to print into that, what happens to those commodities? I can't see them not explode higher. Thoughts on those two scenarios? Cheers
    • WM
      William M.
      16 May 2022 @ 22:16
      Oil of course has risen before into a stagflationary economy. Raoul is convinced it has peaked. I am watching inventories and they don't seen to be showing a peak. Many oil analysts are also predicting a much higher high. I dont know, but what I do know is that my old company, a multinational O&G major, is restricting capex in oil and gas and switching to wind and solar.
  • TK
    Tahsin K.
    16 May 2022 @ 22:36
    Raoul, how are you playing TLT? In the last few weeks, I recall that you're using calls for TLT. Instead of paying up the full premium, does it not make more sense to do a call spread or another strategy to offset the premiums? I'm also curious as to what makes u want to opt for calls instead of just holding TLT, which buys you a lot more duration for your thesis to play out. If it takes longer for yields to fall, which they should eventually, just a matter of whether it's on the horizon versus much longer than anticipated, the TLT will give you solid gains considering how much it has fallen. 1. Are you going 6-mo duration calls here? 2. I would appreciate it if you're able to expand on how you're looking to mechanically execute the bond futures and eurodollar call options.
  • DA
    David A.
    16 May 2022 @ 22:55
    Raoul- Thanks - very interesting. One question how do you see the FED reversing course when inflation / CPI will be at least 2 x their target ( it was only approx 100 basis points from their target in 1984 and 2018 and trending down). In this situation we will have growth dynamic weakening BUT inflation drivers are stickier , less price elastic and broader and the starting point of inflation a LOT higher. Doesn't this make it a tough for the FED to reverse course quickly even as growth is slowing? (especially when you think of the politics) OR isn't it the case that you need to see the actual job losses and then the FED will have air cover to reverse course? Best David
    • JA
      Jon A.
      17 May 2022 @ 10:23
      Agree with the framework, but I also agree with this comment above. Jay Powell is under tremendous political pressure to address inflation. (Danielle Dimartino Booth interview was very timely and insightful here). It is Biden‘s number one issue with voters and will impact the midterms. Politics matter here. While it is a long way from the June meeting to the July meeting (July 25) I don’t see how he can reverse course until July. Of course the contraction will have progressed that much further and have more impact, and therefore a deeper recession and bigger turn around in the markets. .
  • PP
    Percy P.
    17 May 2022 @ 00:09
    I am on the camp that once oil and gas puked, in the eyes of FED, it's job well done, and they will turn back to the whitehouse/congress: you are on your own, sir. Guess what, I just did a search about 2007-2008 period and it returned: "World fertilizer prices surge 200% in 2007, hurting the poor" - so that's that the food CPI print. Mortgage rate already did the heavy lifting a lot way before anyone figured out what to speculate on FED's MBS holding, so that's also just that, on housing CPI print. I haven't even pulled my copper/oil ratio or spread chart yet.
    • PP
      Percy P.
      17 May 2022 @ 00:14
      I am well aware we run the risk of being too early to initiate the bond trade, but then Raoul's only dipping the toes, he's not asking knee depth sizing.
  • JM
    Jake M.
    17 May 2022 @ 01:40
    Raoul, regarding this statement, "I think the Fed is going to pause after June, stop QT over the summer and reverse course by year end." so you think inflation will peak and start falling sharply over the summer?
  • TK
    Tom K.
    17 May 2022 @ 02:49
    Appreciate your insights and thought process Raoul, thank you.
  • IB
    Ivan B.
    17 May 2022 @ 04:25
    Raoul, thank you for the update. Have you added to the Sep TLT calls trade? Could you please clarify? Thank you.
  • JJ
    JW2 J.
    17 May 2022 @ 12:01
    Well put together as always. The entire Global Recession series has been great in outlining the two choices we have; hang our hats in the camp that believes inflation is going to taper down, or the camp that sees no reason for that to happen in the short to medium term. So far in this series I am more convinced by the folks who made the latter argument. Let's see how this develops, have to keep an open mind.
  • rp
    ravi p.
    17 May 2022 @ 13:24
    Even if the FED were to stop further increases in interest rate, and reduce its QT by say 50%, will it really impact the market, or is the coming slowdown going to depress the market anyway, at least for 2022??
  • AH
    Anthony H.
    18 May 2022 @ 00:58
    This is the content I sub for -- thank you Raoul for you clear and actionable takeways.