‘Stagflation is coming to the U.S.,' says this economist. Here's what it means for the dollar, bonds and stocks.
That's the opinion of Savvas Savouri, managing director of QuantMetriks, an economic advisory boutique headquartered in London.
I plan to work until 80. Can I contribute to my IRA while taking RMDs?
Trade Desk's stock sees its worst drop ever, and analysts wonder if Amazon is to blame
'I have a great mortgage rate': I need $80K to buy my husband out of our home. Do I raid my $180K Roth IRA?
As one might imagine, after a long career spanning academia, several investment banks and an extended stint as the economist at fund management firm, Tosca Capital, Savouri has strong opinions on economies, markets and asset prices, and expresses them unequivocally.
His views on the direction of the U.S. economy are emphatic: inflation is going up, the dollar is going down and the yield curve is steepening.
The inflationary pressures he cites are threefold: a declining dollar (which makes imports more expensive), the restrictions on cheap migrant labor pushing up costs and higher tariffs. That the impact of the tariffs have not manifested itself in data thus far is because they are lagging indicators, he says.
Savouri is adamant that tariffs can only ever be inflationary, as was, he points out, almost all of Trump's campaign manifesto. He cites especially the pledges to re-shore manufacturing and the One Big Beautiful Bill Act earlier this summer that he regards as 'printing money'.
In a note entitled 'The Inflationator vs The Powell,' Savouri predicted Powell's tenure at the Fed may be much shorter than the official departure date of May 2026, owing to the pressure being exerted by the White House.
He draws an analogy with the central bank governors of Japan (Shirakawa in 2013) and Turkey (Agbal in 2021) who were discarded for not cutting rates when the political leaders demanded it. It wasn't so much 'the central bankers [who] were carried out of the monetary ring,' he quips, 'but the respective currencies'.
Given his expectations for Powell, the direction of interest rates and inflation then, it's perhaps unsurprising Savouri is decidedly bearish on the dollar, describing a Wile E. Coyote moment of turbo-paralysis before it falls victim to gravity.
This may be welcomed by the Trump administration. Indeed, a big call by Savouri is that any meeting between Trump and China's president Xi Jinping this year will deliver an agreement by Beijing to allow the renminbi to appreciate to help make U.S. goods more competitive. He thinks the buck's current peg to the Hong Kong dollar will thus be removed.
As he sees it, if the dollar falls in tandem with Fed rate cuts and mounting inflation, then the U.S. Treasury yield curve must steepen (longer-term yields BX:TMUBMUSD30Y rising faster relative to short-term yields BX:TMUBMUSD02Y) even more sharply than it has already.
Savouri asks, rhetorically, 'Who is going to buy long-term U.S. debt because he's [Trump] just launched a trade war against the traditional buyers?'
His recommendation to investors looking to shield themselves from such adverse movements is to buy TIPS — or Treasury Inflation-Protected Securities — that adjust interest payments to match inflation.
He also thinks these adverse developments could be beneficial to stocks, but not all of them. He argues inflation is good for those stocks — particularly the large caps/big tech that can pass on costs to consumers — that have a good percentage of their earnings overseas in other currencies, and whose balance sheets are strong enough to handle a higher-rate environment.
The S&P 500 SPX might be fine then, but the Russell 2000 RUT or other small/mid caps that operate within America only, or whose balance sheets have a lot of short-maturity debt that will need to be refinanced at punishingly high rates of interest, will struggle, Savouri warns.
He is no advocate of cryptocurrencies BTCUSD as a method to hedge against potential dollar ructions, and in fact believes their adoption now presents a systemic risk to American financial infrastructure. But Savouri does like gold GC00 as a reciprocal of the dollar and he's convinced that Australian demographics and fundamentals makes the Australian dollar AUDUSD the best bet in foreign exchange markets.
U.S. stock-indices SPX DJIA COMP are slightly higher at the opening bell on Wall Street as benchmark Treasury yields BX:TMUBMUSD10Y inch higher. The dollar index DXY is lower, while oil prices CL.1 rise.
Key asset performance
Last
5d
1m
YTD
1y
S&P 500
6340
0.01%
0.95%
7.79%
19.19%
Nasdaq Composite
21,242.70
0.57%
2.97%
10.00%
27.51%
10-year Treasury
4.249
2.40
-16.30
-32.70
30.30
Gold
3488.9
4.39%
4.68%
32.19%
41.40%
Oil
63.97
-7.77%
-4.34%
-10.99%
-15.93%
Data: MarketWatch. Treasury yields change expressed in basis points
Need to Know starts early and is updated until the opening bell, but to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.
U.S. president Donald Trump said he will nominate his economic adviser Stephen Miran as a temporary Federal Reserve governor.
St. Louis Fed president and Federal Open Market Committee member Alberto Musalem takes part in a 'fireside chat' on banking and credit at 10:20 a.m. Eastern.
Gold futures GC00 broke above $3,500 an ounce, hitting a record high before pulling back, after a report the U.S. is slapping tariffs on imports of 1 kg gold bars.
Trade Desk shares TTD are diving after results that contained poorly-received guidance and news of a change of chief financial officer.
Expedia shares EXPE are surging after the travel booking company raised its full-year outlook on the back of forecast-beating earnings.
SoundHound stock SOUN is bouncing after the voice-based artificial-intelligence company exceeded revenue expectations for the latest quarter.
How Chilean burglars target U.S. athlete's homes as they play.
Why struggling companies are loading up on bitcoin.
Intel's CEO, under attack from Trump, is already at odds with his board.
Ned Davis Research produces Rally Watch, a gauge containing a number of indicators, such as investor sentiment, market breadth and the trend of the Cboe's VIX index VIX. Tim Hayes, chief global investment strategist at NDR, notes that the percentage of Rally Watch indicators is trending lower. '[T]he bull [market] has been reaching old age with the conditions right for a bear to get started,' he says.
Here were the most active stock-market tickers on MarketWatch as of 6 a.m. Eastern.
Ticker
Security name
NVDA
Nvidia
TSLA
Tesla
PLTR
Palantir Technologies
SOUN
SoundHound AI
AAPL
Apple
AMD
Advanced Micro Devices
GME
GameStop
AMZN
Amazon.com
TSM
Taiwan Semiconductor Manufacturing
NVO
Novo Nordisk
Have we reached peak doodle?
Seinfield fans compete in Elaine dance contest.
I tried breast milk-flavored ice cream. Here's the scoop.
North Korean, wrapped in plastic foam, floats to freedom in the South.
'I feel like I'm going crazy': ChatGPT fuels delusional spirals.
And in other news…..Prime Minister of Sweden uses ChatGPT to help him make decisions.
For more market updates plus actionable trade ideas for stocks, options and crypto, .
'I feel shaken': A man offered to powerwash my patio for $50. He would not take no for an answer.
'She lives alone': My mother-in-law, 86, gets $1,300 in Social Security. Is that enough to live on?
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
New York Times
a minute ago
- New York Times
Trump Is Turning Us Into a Doddering Industrial Giant
The American economy seems to be slowing. Although the unemployment rate remains low, the jobs report released this month showed that the U.S. labor market has essentially been stalled since President Trump foisted 'Liberation Day' on us in April. Yes, it's true, the artificial intelligence sector remains white-hot, but once you look beyond it, the weather is chillier — the manufacturing sector may be shrinking, home building is slowing and most employment growth is happening in just one industry: health care. Perhaps this slowdown will soon reverse. But nearly seven months into his presidency, it's now clear that Mr. Trump and his officials' tax and trade policy — and their hatred for next-generation energy technologies — is distorting and, increasingly, robbing the economy of its complexity. And if he keeps at it, Mr. Trump will demote America into a deindustrialized power that relies on technology developed elsewhere and doesn't know how to sell much more than crypto, soybeans and petroleum products. You can see this, first, because Mr. Trump and his officials are waging a war on electricity infrastructure. This campaign is primarily driven by their opposition to the solar and wind farms that they associate with their foils, the Democrats. Even as electricity has clearly become more important to the economy — and even as the country's biggest technology firms strive to secure any spare electron for their new metropolis-size data centers — Mr. Trump and his team have begun a regulatory coup to smother new power development. That war began, of course, with Mr. Trump's signature domestic policy law, which pinched off long-running tax credits for wind and solar energy. But it does not stop there. In the past few weeks, the Trump administration has started an all-out war on renewable energy. Interior Secretary Doug Burgum has weaponized his department's permitting process to slow down wind, solar and battery projects nationwide — every step of every federal permit for renewable energy must now pass under the eye of some political appointee. Another recent order has suggested that the federal government may essentially ban wind and solar farms from public land. A separate Transportation Department policy could even restrict companies' ability to build private wind farms on private land. At the same time, Chris Wright, the energy secretary, has killed federal financing for the Grain Belt Express transmission project, an electricity megaproject that was set to zip 5,000 megawatts of power across the Great Plains. Although the power line was fully permitted and approved, it had grown unpopular with some Missouri farmers, and thus with the Republican senator Josh Hawley. In other moods and moments, Mr. Wright has said that the country must build more power lines, not fewer. But in stranding the project, Mr. Wright has endangered a cheap new power supply and damaged the government's credibility. As long as he governs, executives cannot trust the Energy Department to keep its promises. Want all of The Times? Subscribe.
New York Times
a minute ago
- New York Times
There Is a Specter Haunting Trump's Economy: Stagflation
Since President Trump took office, economists have been waiting for his policies to work their way through the U.S. economy and reveal their consequences. The soft data, mostly surveys of consumers and businesses that track how people feel about the economy, turned down sharply months ago, while the hard data — jobs, G.D.P. growth, inflation — all seemed fine. But recently, a telling series of hard economic data rolled in that has rightfully raised alarm bells about slowing growth and increased inflation — a dreaded economic combination known as stagflation. Mr. Trump's tariffs are now clearly fueling inflation, particularly in goods such as home appliances, cars and food. In the first six months of the year, real (that is, inflation-adjusted) consumer spending, the main driver behind business cycles and robust economic expansion, barely grew, after rising 3 percent last year. G.D.P. growth slowed by about half, to 1.2 percent this year from 2.5 percent last year. When overall growth falls that sharply, the labor market tends to follow, which is precisely what happened: Job growth, at 35,000 per month on average between May and July, is dangerously close to stall speed. While presidents always take credit for good economic news and try to deflect bad news (in this president's case, by firing the messenger who delivered it), it's often hard to link what's going on in the economy to the current administration. Not this time. Whether it's historically high tariffs that never quite seem to stabilize, deportations that threaten to seriously disrupt labor supply in sectors like construction and health services, or a reverse-Robin Hood, budget-busting bill that takes money away from those most likely to spend it, Mr. Trump's policies have pushed economic uncertainty to levels last seen during the onset of the pandemic. This uncertainty has damped investment, hiring and consumption, while the tariffs increase prices. In other words: stagflation. For many American adults, the specter of stagflation may conjure thoughts of the 1970s. But if Mr. Trump's stagflation continues to grow, it will be different in one very important way: The economic damage will be almost entirely self-inflicted. In the '70s, stagflation was caused not by an unconstrained president but by 'exogenous shocks,' meaning big, unexpected disruptions originating from events outside the country and exacerbated by the inaction of the Federal Reserve to offset them. The biggest, and most famous, of these shocks involved the oil market. Because of the oil embargo the Organization of Arab Petroleum Exporting Countries imposed on the United States in 1973 and the Iranian Revolution in 1979, the price of oil increased more than tenfold. As a result, by 1980, the United States was spending roughly six times as much on oil as it was in 1970. That change reverberated throughout the economy and caused inflation to reach a high of nearly 15 percent by the end of the decade. In what is now a famous horror story of monetary policy gone wrong, the Fed not only failed to respond to the rising inflationary pressures in the '70s; it actively made them worse. The reason was in part political: Arthur Burns yielded to pressure from the Nixon White House to disregard concerns about rising inflation and keep interest rates low to hold down unemployment. (Sound familiar?) The resulting stagflation crisis ended only when a new Fed chair, Paul Volcker, raised rates to almost 20 percent in 1980, leading to a deep and painful recession. Want all of The Times? Subscribe.
Yahoo
29 minutes ago
- Yahoo
Winter is coming! Here's a top stock to consider in an ISA for the rest of 2025
I'm looking for top UK shares that could rise in value over the remainder of the year and beyond. Here's one top momentum stock I think ISA investors like me should seriously consider. New gold price spurt? Gold prices have stepped back from April's record peaks above $3,500 per ounce. But the bullion market is beginning to bubble again as worries over global growth, rising inflation, and geopolitical challenges grow. The precious metal was last changing hands near $3,384 per ounce. And City analysts are starting to get excited again about where gold prices will reach in the coming quarters. Take the boffins at ING. On Thursday (7 August) they raised their forecasts for the next two years, predicting that 'potential US Fed rate cuts, along with continued central bank buying and ETF inflows, could send gold to fresh highs'. They now think gold will average $3,250 per ounce in 2025, up from a prior estimate of $3,128. And their projection of $3,512 for 2026 is up from $3,175 previously. Top mining stock I like the idea of buying gold stocks to seize this opportunity. It's why I've purchased the L&G Gold Mining ETF — an exchange-traded fund (ETF) containing a basket of 37 precious metals producers — for my own portfolio. This way, I stand a chance of making better returns than buying a gold price tracker or physical metal. When gold rises, profitability among mining stocks can boom, as their costs remain relatively fixed while revenues rise. A fund that holds many shares helps spread the risk that comes with mining companies. But, on the other hand, buying individual shares can generate even greater capital gains if they're operationally robust. This is the case with Serabi Gold (LSE:SRB) in 2025. The company — which owns exploration assets and working mines in Brazil — has risen 80.3% in value in the year to date. By comparison, my Legal & General gold miner's ETF is up 64.3%. The gold price has increased 28.9% over the period, in US dollar terms. Soaring production Serabi operates in the highly lucrative Tapajós region in Brazil, described as the world's third-largest alluvial gold field. The firm has ambitions to leverage this resource-rich area and is making a good fist of it — production is rising sharply thanks to ramp-ups at its Coringa mine, and was up 17% in the second quarter, at 10,532 ounces. It's on course to raise output to 44,000 to 47,000 ounces in 2025, and to reach: 60,000 ounces next year 70,000-75,000 ounces in 2027 100,000 ounces in 2028 With a string of promising exploration projects, too, Serabi could deliver solid long-term growth. A dirt-cheap gold share Today Serabi Gold trades at 200.7p per share. This means it carries a price-to-earnings (P/E) ratio of 3.9 times, a figure I don't think reflects its enormous growth potential. Given the bright outlook for gold prices and its impressive operational progress, ISA investors should give the company significant thought. The post Winter is coming! Here's a top stock to consider in an ISA for the rest of 2025 appeared first on The Motley Fool UK. More reading 5 Stocks For Trying To Build Wealth After 50 One Top Growth Stock from the Motley Fool Royston Wild has positions in Legal & General Group Plc and Legal & General Ucits ETF Plc - L&g Gold Mining Ucits ETF. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. Motley Fool UK 2025
