Zulauf: Bust/Boom Cycle Ahead As “Decade Of The Rollercoasters” Kicks Off

Wealthion's Photo
by Wealthion
Friday, Dec 16, 2022 - 15:53

Highly-respected veteran investor & macro analyst Felix Zulauf rarely speaks to the media, but he has emerged here at the end of the year to share his outlook for 2023.

Also, below are Wealthion host Adam Taggart's detailed notes of his key takeaways from the discussion:

The tightening process followed by the world’s central banks in 2022 has been contributing to the global economic slowdown.

China is suffering the most from this slowdown & it will take the nation years to get through it (through 2028). Europe/UK is in the second-worst shape, and will experience long-term structural challenges (e.g., energy, political shifts, war repercussion) that will disadvantage it going forward.

The US is in a relatively better position. It’s still benefiting from the massive fiscal stimulus issued post-pandemic. While interest rate-sensitive segments are getting hit, the services sectors are doing ok.

In total, the global economy will struggle through mid-2023.The US will experience a mild recession. Most other nations are likely to experience a more serious one.

Stocks will perform poorly, too through at least Q1 2023, even US stocks as 50% of S&P earnings come from outside the US.

The hiking/tightening into a weakening economy is likely to trigger a major credit event as money becomes more expensive/scarce. China is the likeliest candidate as the deflation from its collapsing real estate loan market is severe & the contagion risk to foreign banks is high. The central banks will be forced to pivot when the credit event occurs. To be clear: Felix thinks Jerome Powell will not be able to pause and keep rates high for a prolonged period – the credit event will demand he revert back to cutting rates/easing.

This is why Felix expects the markets to decline from here until such a pivot happens. His best guess on timing is that something will “break” by late Q1, forcing the pivot response. That policy pivot will unleash a recovery in financial asset prices through the rest of 2023 and well into 2024. He expects commodities to run even more bullishly, persisting through 2025.

As financial assets rebound, Felix expects this will be led in the first phase by the growth stocks & bonds. Then the leadership will transition to the cyclical stocks & commodities (energy, metals and precious metals)

What happens to inflation? CPI and commodity prices will decrease from here until the pivot. Following the pivot, the stimulus will have the biggest boosting impact on scarce resources. In Felix’s mind, that’s commodities – especially now that global trade is becoming increasingly bifurcated (US/WEST vs BRICs). Inflation could roar back to double-digits through 2025/2026.

During this period, bonds yields will rise again as investors start demanding higher returns for the higher inflation cost. Felix can see UST 10 year yields above 8%. Ultimately, those high rates are going to trigger another economic downturn after 2025.

That’s why Felix predicts the next decade will be a “decade of the rollercoasters”, swinging the economy & the markets from bust, to boom, back to bust.

And this is a uniquely bad environment for the passive investing strategies & vehicles that dominate the investing landscape today. To protect & grow wealth through this coming decade, investors will need to actively manage – most people should focus less on picking investments and more on picketing the right advisor to guide them through this era.

The dominance of the West is likely sunsetting. Geopolitically, the coming decade will be one of decline/de-globalization for the developed world. It’s now a divided world and supply chains will never return to what they were. It will be less efficient, more pricey and more inflationary. And the ones who will suffer most will be the bottom 99%.

Felix worries about a trend towards socialism in the world’s democracies, and if things get bad enough, true social unrest/revolt/revolution. He also worries about more ‘administered’ governments (more Soviet-style controls). 

In Felix’s opinion, the US made a tragic blunder by weaponizing the dollar & the financial system vs Russia in response to the Ukraine invasion. It shocked the rest of the world and added a massive incentivized nations to accelerate their de-dollarization plans. He sees the end of the Petrodollar and the end of the US dollar as the single world reserve currency as likely inevitable now. He thinks the influence of the US on the world will be “less and less” over the coming decades.

In the short term, Felix expects the dollar to strengthen again through Q1 as things deteriorate. But should a pivot indeed happen in Q2, the dollar will start weakening upon its announcement. Bond yields will follow a similar trajectory. Felix thinks bonds will have a “great 6 month rally” starting when the pivot is announced.

In terms of the strength of the rally of the stock rally a pivot will unleash, Felix thinks stocks could go up 2x between mid-2024 through end 2024.

In terms of his own portfolio, Felix is “neutral” right now and looking to go “net short” heading into 2023. Between now and end Q1, he expects most assets to decline (even gold), so he recommends most investors build dry powder now in order to be able to deploy it in the post-pivot bull cycle.

Felix encourages the average investor to follow active professional financial advice in this market, but to get it from a seasoned advisor who has experience & respect for the kind of macro cycles we’re dealing with.

Follow Felix:


For more free interviews like these with top Money & Markets experts, visit Wealthion's YouTube channel at

Contributor posts published on Zero Hedge do not necessarily represent the views and opinions of Zero Hedge, and are not selected, edited or screened by Zero Hedge editors.