InfraCap Commentary, October 4, 2023 ~ The most recent Euro Zone Now-Cast indicates that GDP for the 3rd quarter is declining at .9% quarter over quarter or at a 3.6% annual rate of decline. If this trend continues, there will be a very deep recession as the average Eurozone recession results in a GDP decline of only 2.2%.
The ECB has executed the largest and fastest monetary tightening in history by increasing rates by 4.5% within a year and shrinking the monetary base by over 14% in 2023. Large monetary contractions normally cause recessions as interest rates rise, the housing sector and other investment declines, and there are significant layoffs in these sectors. Consequently, given the magnitude of monetary tightening, it is not surprising that the Eurozone is entering a deep recession.
Global interest rates rose sharply after the ECB reduced the Eurozone monetary base by over $500 million in less than a week in early July. We forecast that global interest rates will decline in early 2024 as the ECB will be forced to fight the deep recession by implementing rate cuts and increasing the monetary base. This expected ECB move should end the global liquidity squeeze currently driving global rates higher.
For more, check out the following from Jay Hatfield, CEO and the InfraCap team:
VIDEO Interview - Jay Hatfield Provides Outlook and Investment Strategies for US Markets as Europe Faces Recession ~ a 6 Min Interview with Bloomberg, Sept 15, 2023 ~ a 2 Min Read
Oct 1 Commentary - World Bond Market Rallies on Cool Global Inflation and European Recession
Sept 27 Commentary - The Eurozone is Entering A Major Recession [Updated Sept 27] ~ a 3 Min Read
Sept 17 Commentary - The Economy Does NOT Spontaneously Combust! ~ a 2 Min Read