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A recession is here and is deepening; This is how investors can make gains

As the Federal Reserve prepares to raise rates on July 27th to fight high inflation, some analysts are forecasting a recession.

Alfonso Peccatiello, Author of The Macro Compass, is one of them. Speaking with David Lin, Anchor and Producer at Kitco News, Peccatiello said that “we are literally in a recession.”

A recession is often defined as two quarters of negative GDP growth.

First-quarter U.S. real GDP fell by 1.6 percent, and the Atlanta Fed’s GDP tracker sees second-quarter real GDP falling by 2.1 percent. The second-quarter figures will be confirmed later this summer.

Despite his negative outlook for the economy, Peccatiello suggested that there is hope for savvy investors.

How deep of a recession?

Peccatiello uses indicators such as expendable income, household surveys, and personal savings rates to examine the threat of a looming recession. Based on his research, he said that the recession should last at least four quarters.

He also predicted that the fall in GDP will be on the order of “two to three percent.”

Fed Chairman Jerome Powell recently committed to raising rates to fight inflation. This could trigger a deeper recession. Peccatiello said, “if [The Fed] is willing to keep pushing until something breaks, until unemployment picks up… they can and they will slow down inflation.”

Powell has spoken of a ‘soft landing,’ in which inflation is brought down without collateral damage to GDP. Peccatiello said that Powell is “dreaming” if he thinks he can carry out such a policy.

Source: Kitco News https://www.kitco.com/news/2022-07-21/A-recession-is-here-and-is-deepening-This-is-how-investors-can-make-gains-Alfonso-Peccatiello.html

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