Asks if the market's significant downturn is a delayed reaction to geopolitical events in the Gulf and rising oil prices.
speaker1
Barry Knapp
Europe and Asia have a much bigger energy problem than the US. Japanese and Korean equities got hammered because they are short energy.
Barry Knapp
The dollar is now a petrocurrency. The historic negative correlation between the dollar and oil has flipped because the US is now the biggest oil exporter.
Notes the dollar is up sharply and volatile, asking if this puts pressure on global markets.
speaker1
Barry Knapp
The dollar/oil rise is a bigger problem for Asia and Europe than the US, but it's still a problem because the US already has a K-shaped economy caused by Fed policy.
Barry Knapp
The reaction to an energy price spike should be to CUT rates, not ease. This is not an inflation problem; it's a supply shock that will hurt demand more than cause inflation.
Asks for his world view and if he expects the Fed to cut.
speaker1
Barry Knapp
Part of his stronger growth scenario included the Fed cutting another 50bps to steepen the yield curve for small bank lending. He does expect it.
Asks why the 10-year yield is at 4.1% if the shock is disinflationary.
speaker1
Barry Knapp
The recent move in the 10-year is driven by real rates, not inflation breakevens. He doubts yields will keep going up because this is a hit to growth.
Barry Knapp
A successful shrinking of the US trade deficit will reduce demand for Treasuries over time, an underlying issue not being discussed.