Julian Brigden is Head of Research, Co-Founder and President of Macro Intelligence 2 Partners (MI2), a global independent macroeconomic research company established in 2011.
Brigden joined OPTO Sessions this week to discuss the trends that lie on the horizon for investors and the markets. A wave of post-election “Trump euphoria” — including an accompanying rally in risk assets — may be about to enter a “reality” phase, he says.
“My concern is that certain assets have run quite far ahead. You’re at some really big technical levels on stocks. We’re beginning to see the rotation. People are moving out of some of these very tech-heavy names into some of the more cyclical stuff on the anticipation that we’re seeing onshoring, more movements into industrials and so forth.”
If anyone can assess the bigger picture, it’s global macro-strategist Brigden.
With more than 30 years’ experience in financial markets, including policy-focused consulting, at MI2 he shares macroeconomic insights with leading investment banks and money managers. He previously served as North American Head of Hedge Fund Sales at Crédit Agricole [CRARY] and worked for macro policy intelligence firm Medley Global Advisors.
Links to the Interview:
Hikes, Not Cuts
As leading macro consultants, MI2 takes a “top-down” approach that they say is “unconstrained by trading positions, liquidity needs, political bias or influence”. The skill lies in joining the dots between economies and financial markets.
So what’s Brigden’s takeaway, given current stronger levels of US growth?
First up, he says the US Federal Reserve has got it wrong. “We’ve already seen some dialing back of rate-cut assumptions. Those were ridiculous. This would be the fourth or fifth time in a row where they assume that they can start cutting, that things are going to slow down, and they just don’t.”
Brigden is clear: it’s time for change. One or two more rate cuts likely lie ahead, but he says: “If you look at the rate of change of the S&P 500, it’s quite a decent proxy for the rate of change of GDP generally. [The Fed is] discounting 5–6% real GDP growth. That’s extraordinary. If that’s the case, then the Fed should be hiking, not cutting.”
Weakness in Bonds — and Further Inflation?
The bond market is a closely related area where Brigden foresees real risk for investors. “I think the big challenge for the equity market is what the bond market does here. Because to me in the scenario going forward [it] looks quite vulnerable.”
He doesn’t believe bonds offer any really positive return beyond recessions. “Outside parking some money in one- or two-year treasuries for cash that you want to have if the market corrects a little bit … I see no reason to be structurally invested in Western government debt, and certainly not in US treasuries.”
Brigden is a gold man; precious metals trading is where he started out in the 1980s. “[Precious metals] have just outperformed bonds, particularly US treasuries, as an asset. I look at it purely on a spot basis.”
There are wider issues, too. Ultimately, says Brigden, Western governments are running far too much debt. Options to control this include defaulting (“not a good one”) and financial repression, which he believes they are doing a good job of — though the costs are clear.
The impacts of the Trump administration remain uncertain. “We’re going to get all these stimulus policies, we’re going to get this unleashing of animal spirits, and we’ll get lots of rate cuts, too,” predicts Brigden.
But the ongoing problem of inflation may remain unsolved by policies including Trump’s tariffs on imports from nations including China. “I think the tariffs could be highly inflationary because they’ll add to goods prices, which has been the main source of disinflation,” warns Brigden.
The thorny issue of unemployment complicates the macro picture. “How are we going to grow at 5–6% when we have 4% unemployment?” asks Brigden. “These are essentially post-World War II lows in unemployment. There’s only one other time in history where we tried to re-accelerate growth from these levels, and it was the late 1960s [when] inflation came surging back. It became the second wave of what ultimately were four waves of inflation that ran into Volcker’s 1980s high.”
Not So Exceptional?
Looking ahead, no one yet knows what artificial intelligence’s (AI) true impact will be on employment and productivity. It could pave the way for a period of accelerated growth.
“If we get productivity of sufficient magnitude, you can run an economy hot, which is great for the equity market,” says Brigden.
A key question is when the AI productivity revolution will truly, meaningfully arrive. “I’ve read some great work and I do believe 2028 is when we’ll really start to see the true benefit … we’ll have enough of the power grid sorted out and investments in nuclear power stations.”
In macro terms? “That’s a long way away. Four years might as well be an eternity. I can take the bond market to 10% and back to zero in that time.”
What about the exceptionalism we keep hearing about in relation to Trump — the idea the US is special?
“I think there’s an awful lot of fragility in this concept,” Brigden says. “We keep hearing this thing, it’s exceptional. Well, running a deficit of close to 7% of GDP isn’t exceptional … Spending money like it’s water is not my definition of exceptional.”
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