Commodity Strategist Warns US Economy Heading Toward 'Severe Deflationary Recession'

Bloomberg Intelligence’s senior commodity strategist, Mike McGlone, has warned that the U.S. economy is “heading towards a severe deflationary recession,” emphasizing that the Federal Reserve is still tightening. “Typically, when you have commodities collapsing at this velocity in the past, the Fed has already been easing, and they’re still vigilant against that,” he cautioned.

Strategist Says We’re ‘Heading Towards a Severe Deflationary Recession’

Mike McGlone, a senior commodity strategist for Bloomberg Intelligence (BI), the research arm of Bloomberg, warned in an interview with Yahoo Finance Live last week that the U.S. economy is heading towards a severe deflationary recession. He described:

I see what we’re doing is heading towards a severe deflationary recession, as indicated by commodities, by the Fed still tightening.

“Now we have a pretty serious credit crisis going on with just pulling back of deposits from the major banks. That means it’s just starting to get started. And the key thing … is we were just looking at annualized industrial demand for natural gas in this country. It’s the lowest in six years now. And that’s an annualized basis so it’s not seasonal,” the strategist explained.

McGlone also cautioned that the Federal Reserve keeps talking about raising interest rates higher despite recent economic data. “They’re starting to get that trend of misses, misses on PPI, misses on retail sales. And it’s just, to me, part of what happens in a recession. I think that’s the stage we’re at right now,” he detailed. “The markets are getting it. T-note yields, 10-year notes are getting it, but the Fed is still being vigilant against inflation.”

The commodity strategist continued: “You look at PPI, I see PPI on a year-over-year basis heading towards negative by the time we get to July. And that’s just what happens normally when commodities collapse.” He stressed:

The Fed is still tightening. Typically, when you have commodities collapsing at this velocity in the past, the Fed has already been easing, and they’re still vigilant against that.