Julian Brigden, co-founder and head of research at MI2 Partners, believes the U.S. economy is at a critical inflection point. In this episode, Brigden interrogates the economic expansion and asks the tough questions about the rally in stocks: Why have U.S. equities outperformed the rest of the world so late in the cycle? What are the key risks? And what will central banks do next? Filmed on April 19, 2019 in New York.
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Fed Trapped "Between the Devil and the Deep Blue Sea" (w/ Julian Brigden) | Expert View
For the full transcript: https://rvtv.io/2Wda76E
This is another classic example of the sort of academically driven policies that we've seen come out of the halls of central banking, which are no longer really populated by central bankers, but by academics. The theory was fine, OK? The theory was kind of like how you launch an aircraft off an aircraft carrier. You jam the aircraft back at the back of a deck. You let it build up enough momentum and speed. And then eventually you let the elastic band go, and the thing soars off into the bright blue yonder. That's great on paper, but it comes, unfortunately, with some consequences.
Hello, everyone. My name is Julian Brigden. I'm the co-founder of MI2 Partners, and the co-producer, along with Raoul, of Macro Insiders. I'm here today, because I think we're at a really important inflection point in markets. I think the big debate now, at least in the equity market, and this opposition in the equity market, is that the central banks have once again pulled the rabbit out of the hat, and successfully reflated the bull market just like, in a way, that they did in early 2016.
I think that's possible. I'm not sure that we're quite there yet. I think some of the assumptions that are being made are a little pre-emptive. And so I think there are some still risks. I think ultimately I'm pretty certain where the trend is going. But I think it's important at this juncture to sort of take a step back, look at how we ended up here potentially, and what are those markers that you need to be watching.
How did we get to where we are now?
I put some slides in the presentation. And the first one that I've stolen from the Fed is Janet Yellen's slide on optimal control from D-day of 2012-- so 6th of June. If you look at that slide, what you'll see is a sort of typical trajectory of where rates should have gone. And then you see a dotted green line that represents Janet Yellen's policy, which she referred to as optimal control.
This is another classic example of the sort of academically driven policies that we've seen come out of the halls of central banking, which are no longer really populated by central bankers, but by academics. And the theory was fine, OK? The theory was kind of like how you launch an aircraft off an aircraft carrier. You jam the aircraft back at the back of a deck, you let it build up enough momentum and speed, and then eventually you let the elastic band go, and the thing soars off into the bright blue yonder.