(Kitco News) – With rising interest rates, disrupted global supply chains, and aggregate demand expected to shrink, investors can expect risk assets like stocks and cryptos, as well as traditional safe haven plays like gold to take a hit this year, said Alfonso Peccatiello, author of The Macro Compass.
“This is an environment where you have nowhere to hide. You can’t buy stocks, you can’t buy gold, you can’t buy Bitcoin,” Peccatiello told David Lin, anchor for Kitco News.
The fund manager of a billion-dollar multi-asset portfolio turned-author of his own newsletter noted that today’s macro environment is similar to that of 2018, during which all assets fell in tandem.
“What you want to own there is just dollar cash at the end of the day and some protection on your risk assets, so some volatility, some VIX, and some dollar cash. Anything else, but I’m sorry, but it doesn’t work,” he said.
Peccatiello is short stocks, an in particular, tech stocks, and sees the S&P 500 trading 10% lower from current levels this year.
While gold may enjoy some tailwinds later in the year, the risks are to the downside for the metal in the foreseeable future, he said.
“The problem is that inflation expectations are starting to become de-anchored. We are starting to have traders pricing in a meaningful probability that inflation will print above 5% over the next five years. If you are a policymaker, you don’t like that,” he said. “I would argue we’re at the point where if inflation becomes sticky high, then policymakers are going to react in a non-linear fashion. They’re going to really make sure that rates are hiked to much higher levels, and that hurts gold.”
The Federal Reserve is expected to quicken the pace of rate hikes this year, which would be negative for high Beta sectors, like technology. Because Bitcoin has held a very close correlation with tech stocks, Peccatiello expects Bitcoin to retrace as well, as low as $26,000 a coin.
For more information on Bitcoin and gold, watch the video above.
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