The Federal Reserve has to keep tightening in response to worrying inflation data, but its actions are going to weigh on commodities and the broader market, warned Bloomberg’s Macro Strategist Mike McGlone.
McGlone spoke to Kitco at Mines And Money Miami on Thursday.
“The Fed is still tightening. The world still tilts towards recession,” said McGlone. “The stock market and commodities [will] continue to revert lower.”
The S&P 500 is up 5% year-to-date, although the recent trend is lower. Gold is off 9% from its 2023 high, and the NASDAQ is down 7.4% on the year.
The Fed’s work has been made more difficult by a hot jobs report, which came in at 517,000 positions in January. The unemployment rate also fell to 3.4%, the lowest level since 1969.
“It’s unfortunate, but it’s the unique stage of the cycle,” said McGlone. “There’s nothing [the Fed] can do but tighten, although they should be easing soon…they got stuck in that transitory stage of inflation.”
McGlone said inflation numbers will improve and conditions will be “very deflationary a year from now.”
Once this phase passes, McGlone expects precious metals to shine.
“Maximum pain before the gain,” said McGlone. “I fully expect gold in U.S. dollar terms to break above $2,000 an ounce and never look back.”