Singapore: Marc Faber recommends treasuries and says the US is at the start of an economic recession, clashing with Federal Reserve chair Janet Yellen’s view that things are improving.
“Ten-year US Treasuries are quite attractive because of my outlook for a weakening economy," Faber, the publisher of the Gloom, Boom and Doom Report, said in an interview with Bloomberg on Monday. “I believe that we’re already entering a recession in the US" and US stocks will fall in 2016, he said.
Yellen raised interest rates this month for the first time in almost a decade and said Americans should take the decision as a sign of confidence in the US economy. Analysts differ over whether the Fed’s decision to increase its benchmark came at the right time because the inflation rate is stuck near zero even as gross domestic product (GDP) expands.
The benchmark US 10-year note yield was little changed at 2.22% as of 6:40am in London, according to Bloomberg Bond Trader prices. The price of the 2.25% security due in November 2025 was 100 1/4. Treasuries have returned 1.1% in 2015, down from 6.2% last year, based on Bloomberg World Bond Indexes.
US economic growth slowed to an annualized 2% rate last quarter from 3.9% in the previous three months, the commerce department said 22 December. The last time the economy was in a recession was December 2007 until June 2009, according to the National Bureau of Economic Research.
“While things may be uneven across regions of the country and different industrial sectors, we see an economy that is on a path of sustainable improvement," Yellen said on 16 December after the Fed increased its benchmark rate by a quarter percentage point.
Former US treasury secretary Lawrence Summers and economist Nouriel Roubini had both warned the Fed should be cautious because inflation has yet to pick up as the economy expands.
Faber is also at odds with the consensus view on Treasuries. US 10-year yields will climb to 2.8% by the end of 2016, based on Bloomberg surveys of economists with the most recent forecasts given the heaviest weightings. Bloomberg