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Macro Voices

MacroVoices #377 Daniel Lacalle: On The Road To Stagflation

Thu May 25 2023

MacroVoices Podcast Summary

General Information

  • MacroVoices is a free weekly financial podcast targeting professional finance, high net worth individuals, family offices, and other sophisticated investors.
  • The podcast provides insights into the European macroeconomic situation and where markets and the economy are headed in the second half of 2023.

Market Update

  • Patrick Soresna provides a macro scoreboard week over week as of May 25th, 2023, including S&P 500, US Dollar Index, July WTI crude oil contract, gold, copper, uranium, and US 10-year treasury yield.
  • Key news to watch includes the Friday core PCE index and next week's consumer confidence numbers, ISM manufacturing numbers, and jobs numbers.

European Macroeconomic Situation

  • The Eurozone economy remains weak with the manufacturing sector in its 35th month of contraction.
  • GDP has slightly improved due to higher government consumption from increased debt.
  • The services sector is relatively strong thanks to tourism and savings accumulated during the COVID crisis.
  • Citizens across the EU are feeling the impact of elevated and persistent core inflation and overall inflation.
  • Rate hikes will have a significant dent on the EU economy as 80% of it is financed through direct banking lending.
  • Weaker commodity prices and lower consumption may come back to bite in winter if no significant action is taken to reduce or improve the energy crisis.

Energy Crisis in Europe

  • The European Union survived the winter energy crisis due to mild temperatures and rate hikes impacting commodity prices.
  • However, European energy security is still a concern, especially regarding liquefied natural gas imports.
  • Germany is more dependent on coal and imports of Russian natural gas and products are at the same levels as prior to the 2022 crisis.
  • Spain and Germany will have shut down at least three more nuclear terminals between winter 2022 and winter 2023, increasing dependency on fossil fuels during low wind and solar load factor periods.
  • Energy consumption peaks in summer, but compromising air conditioning would compromise the lifestyle of European people.

Inflation and Stagnation

  • Inflation is expected to have a small decline but remain persistent and elevated.
  • Reduction of inflation to pre-pandemic levels requires a significant contraction in the economy.
  • The US and Eurozone may not escape stagnation despite avoiding a recession.
  • Stagflation is likely to occur due to slow government spending and consumption contraction, leading to inflation and economic growth slowdown.

Investment Strategies

  • Gold is performing well as a reserve of value and real money in an environment of stagflation.
  • Bonds and equities are highly correlated, making it difficult for investors to find a decorrelated asset for protection.
  • Bitcoin is differentiating itself from other cryptocurrencies and becoming a possible alternative in the metaverse and other markets.
  • However, Bitcoin's volatility makes it difficult to reach full reserve of value status.
  • A market correction or crash in technology stocks could lead to investors selling their Bitcoin.

Geopolitical Concerns

  • The worsening relations between China and the United States will lead to slower growth and negative trade.
  • The reopening of the Chinese economy narrative ignores the impact of the burst real estate bubble on industrial and energy commodity demand.
  • There is concern that someone may think there is no need to implement promises and negotiations, leading to a serious conflict.
  • China and Russia are predicted to assert a digital currency to compete with the US dollar as the world's global reserve.

Market Outlook

  • Crude oil is currently in a negative price action and needs work for bulls to repair the chart.
  • Equities are expected to experience volatility due to debt ceiling political theater and uncertainty in the marketplace.
  • The recent pullback in the S&P 500 has not broken any primary trends.
  • Volatility has been low but there was a recent correction that brought the VIX back up to around 20.
  • The US dollar is firming up and may retest the upper boundary range of 105 on the Dixie.
  • Gold futures have experienced a correction and are close to reaching the bottom of the price channel, providing an opportunity for long positions at a lower price.

Podcast Information

  • Registering for a free account at provides access to weekly research roundup emails, listener discussion forums, and a research library.
  • More registered users will allow for the recruitment of high profile feature interview guests in future programs.
  • MacroVoices can be subscribed to on iTunes for automatic delivery to mobile devices each week.
  • Questions for the program can be emailed to and may be answered on air during mailbag sessions.
  • MacroVoices is presented for informational and entertainment purposes only and should not be construed as investment advice.