Phil Palumbo: ‘brace for recession by the end of 2022’

on Mar 22, 2022
  • Phil Palumbo says investors should brace for recession by the end of 2022.
  • He doesn't expect the Fed to raise rates by more than four times this year.
  • The investment manager sees long-duration treasuries as the play here.

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A day after Jay Powell confirmed that he was open to raising rates by 50 basis points at the FOMC meeting in May, the founder of Palumbo Wealth Management says investors should brace for recession by the end of the year.

Palumbo blames the Ukraine war

This morning on CNBC’s “Worldwide Exchange”, Phil Palumbo reiterated that the U.S. Federal Reserve was way behind the curve. He said:

Before the war, we had an oil problem, an inflation problem, a supply problem. Due to this war, all of that’s been exacerbated and now with lockdowns in China, supply will remain an issue. Put that together, I can’t imagine any other scenario but a recession by the end of 2022 and into 2023.

U.S. inflation climbed to 7.9% in February.

How to play the looming recession?

According to Palumbo, market volatility will make it difficult for the central bank to raise rates more than four times this year versus six more that Jerome Powell signalled last week. He added:

I think long-duration treasuries is the play here as we think about a recession at the end of 2022. I think you’re a buyer of gold here and dips in commodities, but ultimately, recession will destruct demand and oil will sell-off. So, you’ve got be careful on the commodity side.

The S&P 500 index is up 1.0% on Tuesday despite hawkish comments from the Fed Chair last night.