Real interest spiked in June. Inflation expectations dropped while “higher for longer” nominal Fed rates caused the real rate to spike. Remember that the real rate equals nominal rate less inflation.

According to General Equilibrium economic theory, a spike in real interest rate is followed by a decline in real GDP. And that is one of the predictions that I made earlier this year. A spike in real interest rate and then a recession.

What is your financial exposure to a recession?

What if home prices, stocks, and bonds are all cut in half?

Many advisers are calling for a “rotation to value”. What they mean is that people should sell growth stocks and buy “safer” stocks.

The problem with this idea is that when the SHTF, everything goes down. The good and the bad.

We’re predicting a recession in the second half of 2023, along with real interest going higher (regardless of inflation), oil prices going higher, Russia diverting energy sales to China and away from EU, and stocks to go even lower.

The investment process begins with quarterly geopolitical, demographic, economic and technological analysis seeking to detect continuing trends and trend changes.

Trends are then translated into asset classes and specific stocks that would benefit or suffer from these trends or changes.

Over the Summer the Biden administration released oil from the Strategic Petroleum Reserve. The releases are scheduled to end by November, just in time for Winter (or the Midterm elections).

Beginning in November, demand is forecast by EIA to exceed supply. However, this forecast does not take into account Europe’s sanctions on Russian oil, which may reduce supply even more.