Top Analyst Darius Dale: The Federal Reserve And US Government Could ‘Break Something’ If They Drain $900M Of Liquidity

Top Analyst Darius Dale: The Federal Reserve And US Government Could ‘Break Something’ If They Drain $900M Of Liquidity


Photo: Darius Dale, founder of 42 Macro, Feb. 21, 2022, YouTube

Rising inflation has many people confused about the state of the economy. But 70 percent of Americans feel there will be a recession soon, according to a new survey from MagnifyMoney. Some consumers think we are already in a recession. Not so, says top financial analyst Darius Dale.

Dale is the founder and CEO of 42 Macro, macro risk manager at 42 Capital Management, and a former managing director of Hedgeye Risk Management.

During an interview with the popular YouTube show “The Best Business Show,” Dale explained that while many may believe the surge in inflation has led to a recession, the economy has not experienced all the indicators of a true recession.

During the July 7 interview on a segment entitled “Warning: The Recession Is Here,” Dale said, “We are in what we call a technical recession in the economics community. That’s where you have two consecutive quarters of negative GDP growth,” he said.

GPD stands for gross domestic product, and it is a monetary measure of the market value of all the final goods and services produced in a specific time period.

Dale empathically stated, “We are not in an actual recession.” 

One of the indicators of recession is high unemployment, and Dale pointed out that the country was “no way near a recession in labor market terms.” And in fact, the labor market is “white hot.”

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While consumers don’t want to experience a recession, Dale noted the Federal Reserve and the U.S. government want a mild recession.

“The Fed wants a mild recession. They won’t tell you that,” he noted during a different interview with The Best Business Show. “They aren’t going to get inflation down without it.”

But he warned, “Our math suggests we could see over $900 billion of net liquidity drained from now through year end…the Fed will break something if they try to do that.”

Investors, too, are worried about a recession and the actions of the Fed.

The month of June was not great for fund managers as global stocks fell 8.8 percent, the second-biggest dip in a decade. And, bonds are on their way to the worst year since 1865, The Financial Times reported.

The balance sheets for the most prominent central banks will shrink by roughly $4 trillion by the end of 2023, Morgan Stanley estimated.

“Liquidity is driven by central banks,” Guilhem Savry, who works in cross-asset solutions at Swiss asset manager Unigestion, told The Financial Times. “Over the past 10 years there has been large liquidity in the US and everywhere else, and now investors know it’s finished. It’s over.”

Photo: Darius Dale, founder of 42 Macro, screenshot from Excess Returns podcast video, Feb. 21, 2022, YouTube, https://www.youtube.com/watch?v=ov8HzgiSRxw