May 22, 2026 – Greg Weldon, publisher of the Global Macro Strategy Report, offers a candid assessment of current global economic risks. He discusses the geopolitical stalemate between the U.S. and Iran, highlighting the influence of China and Russia and the potential for prolonged energy inflation. Weldon underscores weaknesses in the U.S. consumer and labor markets, the dangers of rising debt, and the Federal Reserve’s limited options amid mounting stagflation risks. He warns of narrow stock market leadership, elevated margin debt, and the likelihood that central banks will opt for monetary reflation, urging investors to remain cautious in today’s volatile environment. Have any feedback, questions, or breaking news about today’s show? Click here to send our team a message.

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What Greg Weldon says

The current U.S.-Iran standoff is a “lose-lose” scenario for the U.S.; both escalation and inaction hurt U.S. interests.

China and Russia are “pulling strings” behind Iran, aiming to drag out the conflict and hurt U.S. prestige and the economy.

Persistent high oil prices threaten to prolong inflation and pressure the Fed, especially with U.S. oil inventories at five-year lows.

The U.S. consumer and labor market are both much weaker than official narratives suggest; consumer confidence and participation rates are low.

Rising debt levels (over 185% of GDP) in the U.S. leave little room for policy error; interest costs are now a major share of the deficit.

The Federal Reserve is boxed in: raising rates to fight inflation risks causing a recession, while keeping rates low fuels deficits and asset bubbles.

Market leadership is very narrow (semiconductors, tech, energy), while most sectors like retail, financials, and real estate are breaking down.

The risk of a sharp, sudden downturn is high due to record margin debt and overextended valuations; selling could cascade quickly.

Central banks will ultimately choose reflation (money printing) over a deflationary crash, leading to further currency debasement and asset inflation.

Being cautious, raising some cash, and considering protective strategies (like put options) is wise given the potential for stagflation and sudden market drops.

Transcript

Jim Puplava:
Well, the stock market is still at record levels—both for the S&P and the Nasdaq—and even the Dow Jones Industrial is coming up. How long will this last? Let’s find out. Joining me on the program is Greg Weldon, publisher of the Global Macro Strategy Report. Greg, just before we went on air, we were talking about the no-win situation that the president and the U.S. find themselves in regarding the war. If we bomb Iran, oil prices skyrocket and shut things down, but if we walk away, we lose prestige and Iran wins. Let’s begin there: what are the possibilities in either direction? What does this mean for the markets and investments?

Greg Weldon:
Yeah, I think you nailed it. I’ve been saying this myself for a while: it’s a lose-lose at this point. I think Donald Trump painted himself into a corner with his rhetoric, threats, and bullying. Now he can’t get out without getting some paint on himself. If he had just kept quiet and done his job, things might have gone smoother. But this back and forth—one day threatening to bomb, the next day wanting a deal—just drags things out.

In my recent Global Macro Strategy report, I actually laid out his comments day by day. The approach shifts 180 degrees repeatedly, from threats to near-agreements. What Iran, China, and Russia want is to prolong this as long as possible. The stalemate scenario is perfect for them, which is why they scurry back to the negotiating table whenever a big threat arises, but then they aren’t realistic about their demands—reparations, tolls in the Strait, enrichment rights, etc.

China and Russia are pulling Iran’s puppet strings. The U.S. is being outplayed, and Trump is left to bluff, then fold. That’s not a winning poker or war strategy. If Trump launches a major attack, energy prices surge and inflation gets even worse. Or he continues the cat-and-mouse game, with no real victory possible. He wants an exit, but he’s made it hard to find one.

This entire situation is just being prolonged, possibly until the 250th birthday celebration, to China’s delight. Xi has played this well. As a proud American, it pains me to say it, but China has outplayed Trump every step. Trump is forced to play the short game, given U.S. politics, whereas Xi can play the long game. Dragging this out until the midterms, coupled with high gasoline prices, suppresses consumer spending and weakens the economy. The official narrative about the consumer and labor market being strong is fraudulent—the data shows otherwise. The goal is to weaken Trump going into the midterms by keeping the consumer and economy under pressure.

Jim Puplava:
And if, say, Republicans lose both Houses in the elections, we already know what’s going to happen in the next two years: impeachment trials and chaos.

Greg Weldon:
Yeah, normally gridlock can be positive because it prevents drastic changes, but in this case, gridlock would derail Trump’s agenda and make it even harder for the country to get back on track after the damage from Joe Biden’s years and the millions of illegal immigrants in the country. High taxes, spending, and household debt—$56 trillion, or 185% of GDP—are huge issues. Just look at what’s happened to Japan: 240% of GDP in public debt, and their government had to intervene in the bond market. If we’re not careful, we could face the same situation here.

I think we’ll avoid an immediate crisis, but the war, energy prices, and consumer distress all combine to create a tough outlook for Trump and the economy as well as the markets. The dollar’s rising, bond yields are spiking, and there’s talk of the Fed hiking rates instead of cutting, which is already dramatically tightening monetary conditions. Asset prices are at risk—gold is wobbling, stocks have had a few wobbles, recovered somewhat, especially in Europe; and stagflation is a major factor. The focus on the war masks some of these deeper, more troubling issues for the stock market and assets in general.

Jim Puplava:
Let’s talk about oil prices. Suppose oil keeps rising, and say Trump attacks and oil jumps to $140 or $150. What can the Fed do? Hiking rates won’t make more barrels of oil appear—they can just kill the economy.

Greg Weldon:
That’s exactly the problem. There are two ways to look at this. First, we don’t even need higher oil prices—just holding at current levels is enough, because the back end of the futures strip is lower. As time passes, those deferred contracts have to rise to match current prices. Come July, as contracts expire, you’ll see the back end move up.

Meanwhile, inventories are drawing down significantly, despite SPR releases. U.S. oil inventories are below their five-year low. “Energy independence” only applies if you count natural gas. We’re producing record crude—over 13.5 million barrels a day—but refinery throughput is above 16 million. We’re not producing enough crude to meet domestic demand, let alone export, and we’ve only just become a net exporter recently. This stresses the U.S. balance sheet—many thought we were insulated, but we’re not. If oil just stays at these levels, the “base effect” alone means year-over-year CPI inflation stays high, even without a further price spike. If there’s an attack and oil jumps higher, inflation actually accelerates. That’s a real pickle for the Fed, and honestly, I wouldn’t want Powell’s job right now.

Jim Puplava:
I spoke to an executive at a major oil company yesterday, and he said we’re close to scraping the bottom of the barrel. We’ve drawn from the Strategic Petroleum Reserve, the IEA releases too, but that’s being drained—so even if there were a deal today, we’re months away from relief. And that’s not counting wells that have been idled.

Greg Weldon:
Exactly—and you’re giving Trump’s opposition all the ammunition they need to criticize his strategies. This war could have been over, and I don’t understand why it wasn’t. Trying to re-escalate now is just a bluff, and everyone knows it. Iran keeps scurrying to the negotiating table when threatened, but that’s all bluff from Trump, who keeps having to fold because he can’t actually deliver on threats. As I mentioned off-air, he’s painted himself into a corner with his mouth and can’t get out without damage.

Jim Puplava:
It’s amazing—just today Bloomberg reported Iran is talking to Oman about charging fees to exit. They weren’t charging before, but now they’ll come out a winner.

Greg Weldon:
And now NATO is sending ships too—which is interesting given how bad Europe’s recent data has been. Europe is experiencing significant stagflation. The ECB is revising its forecasts downward, with more revision to come. The Bundesbank’s latest report was alarming, and the ECB’s Senior Loan Officer Survey shows a credit crunch—credit demand dropping, standards tightening, and monetary conditions tightening globally. If we get another bout of inflation, it could be the dagger in the back of the U.S. consumer, further slowing demand. With public and household debt at 185% of GDP, you need final demand growth to service that debt or you get a Japan-style bond market problem here. The Fed will eventually have to accept higher inflation to protect growth—maybe more QE or even rate cuts despite rising inflation.

The labor market isn’t solid either. The participation rate outside of the pandemic is the lowest since the 1970s. In the last 12 months, 2.4 million people dropped out of the labor force; only 560,000 jobs were created. When new job creation falls below one million over 12 months, recession follows, and we’re there now. Factoring in these dropouts, real unemployment could be 6.1%. The part-time for economic reasons has spiked, and U-6 unemployment is above 8%. The headlines are about more bank layoffs and Meta laying off more people. The Fed’s own projections assume no AI impact on unemployment, which is ludicrous—and the labor market will face real pain, likely rising unemployment into the midterms.

Jim Puplava:
Let’s talk about the deficit. The Trump administration just reported a $2.1 trillion deficit—6.2% of GDP—the highest in a long time. If interest rates stay elevated, that could add another $200 billion in interest costs annually. How long until the Fed has to cut because we can’t afford recession with this debt?

Greg Weldon:
It’s funny—Powell is painting himself into a corner by talking about reducing the balance sheet, but QT isn’t possible. It’s like the BOJ saying a decade ago they’d shrink their balance sheet—economic disaster would follow. A 6% deficit-to-GDP ratio is extremely high, especially when this isn’t a crisis period by official metrics. The consumer isn’t healthy, the labor market isn’t solid, and growth is weak. Some indicators are already at crisis levels. Retail sales growth is being driven largely by gasoline stations—47% of the dollar gain lately, 65% in March, by far the highest ever. Meanwhile, vehicle sales are falling, and eating/drinking establishments’ sales growth is near pandemic lows—historically a recession signal.

Raising rates now would exacerbate a recession that’s already on its way—this is hardcore stagflation. The government might be pushed into blowing out the deficit even further and implementing yield curve control or similar—like Japan—to stabilize the bond market, but that only drives inflation higher and perpetuates today’s stagflation conundrum.

Jim Puplava:
We just touched 4.67% on the 10-year, and the 30-year was at 5.18%. With almost $40 trillion of debt, we can’t afford rates like that.

Greg Weldon:
Exactly—the interest cost on the debt is already over $1 trillion annually. Half the deficit is just interest costs, and that will only get worse if rates rise. This is a one-way street. I don’t want to sound like a doomsayer, but the risks are obvious. Stocks and even gold and industrial metals are breaking down due to tightening monetary conditions. The Fed hiking rates now would only worsen this asset deflation, which is already being priced in. It’s fascinating that the mainstream held on to rate-cut narratives until the last minute, but now, even futures markets are pricing in hikes.

At the end of the day, taxpayers and consumers will pay the most.

Jim Puplava:
Before the fall elections, I suspect the Fed will have to do something because this can’t continue. And even if oil prices just stay flat, the idea that things go back to $70 a barrel and we’ll pay $3 at the pump seems unlikely.

Greg Weldon:
Not as quickly as it needs to. The base effect carries through October—so if prices just stay here, we’re looking at around a 40% year-over-year increase. The dollar is also breaking out to the upside, and if the dollar index gets above 104.64, that’s a major breakout. The dollar has shifted from depreciating over the past year to now being flat—and if it breaks out further, that tightens monetary conditions even more.

Average weekly earnings on a real basis are now flat. Even high earners’ confidence is falling, and consumer confidence is at historic lows—worse than during previous crises like the Carter years. That doesn’t bode well for spending, which we need to service debt. When facing a deflationary abyss, every central banker will always choose reflation—it’s less painful. We can’t have the ‘great reset’ yet—it would be too painful. At some point, the dollar card will be played; that’s when precious metals will have a huge turnaround, although they may see significant downside first, creating a buying opportunity later this year.

Jim Puplava:
Let’s talk about the markets—we’ve got narrow leadership again: the Magnificent Seven, the “Mag 10” stocks, semiconductors. But most stocks are declining, as you see in unweighted indexes. When one sector drives the whole market, what does that tell you, Greg?

Greg Weldon:
It tells me there’s a lack of real leadership—especially when the dominant sector isn’t a large enough part of the economy. The stock market isn’t always aligned with the economy, but there is always some correlation, and the consumer is still 71% of the economy.

Industrial production numbers recently show things like computer equipment are growing fast, but it’s only 0.21% of industrial output. The dominance by semiconductors, information tech, and energy tells you something. Recently, infotech started rolling over versus energy, and data center build-outs are facing pushback, water shortages, and so on. Water is also going to be a big driver for agricultural inflation.

Looking at sector breakdowns, retail (XRT), consumer discretionary (XLY), online retail (PNQI), financials (XLF), real estate, health care, and homebuilders—all are breaking down against the S&P. Lay this over the index, and you have 1,000 to 1,500 downside points at risk. When AI and semis finally lose steam, you’ll be left with a coyote-off-the-cliff market—like in the cartoons, running in mid-air and then realizing you’re about to fall.

Korea’s market is even more extreme, with two stocks responsible for 70% of gains. It isn’t quite as bad here, but it’s troubling—almost all sectors except semis, infotech, and energy are breaking down. We’ve seen this before: 1987, 1990, 1998, 2000, and 2007-08. Narrow leadership is always a warning sign. In my view, the risk/reward in stocks just isn’t there.

Jim Puplava:
I see a monetary reflation coming before fall for two reasons: a $2.1 trillion deficit in a growing economy—if we get a recession, that could go to $3 or $4 trillion. And we can’t afford a bear market in stocks—California relies on capital gains and options for a quarter of its revenue, and at the federal level, it’s huge too.

Greg Weldon:
That’s right—and it’s the only thing holding up the consumer at the high end. That resilience is fading too, and a hit to the stock market would really lock down consumer spending quickly. A credit crunch would make things much worse. It really is like walking through a minefield blindfolded—too much risk, not enough reward.

That’s also true for crypto and most metals. Right now, it’s a strong-dollar, tightening conditions story. Eventually, it’ll flip, and that’ll be the trade of the decade. Think about what happened when Silicon Valley Bank failed—the Fed printed hundreds of billions in weeks. They’ll do it again if needed. Central bankers always choose reflation over deflation. The U.S. now is in the same position as Venezuela or Argentina decades ago: good income, big upper class, then deficits and currency debasement. That perpetually debased currency will ultimately drive stocks higher long term, but not enough to keep pace with the loss in purchasing power.

So, passive investing in stocks won’t keep up with currency debasement. Investors need strategies that can go long and short, across assets globally. Every step, the math only gets worse: $56 trillion in debt now, $36 trillion during the pandemic, and each time it takes more new money to get the same effect. Gold-adjusted, the dollar has lost 97% since 1985, and it can lose another 97%. We’ve seen it happen in country after country.

Just look at the Indian rupee—testing 100 rupees against the dollar. They’re threatening intervention and restricting gold imports. Gold in rupees is rolling over, which is a red flag for gold bugs. I’d be cautious with gold here as well.

Jim Puplava:
Sounds like it’s time to be cautious, maybe raise some cash ahead of what’s coming. What concerns me is that if there is a downturn, it could be sudden and sharp, given record margin debt. When you get margin calls, selling begets selling.

Greg Weldon:
Technically, this market is the most overextended I’ve ever seen—biggest disconnect from the economy and most momentum-driven, with the weakest leadership. Is this something you want to put new money into? Not right now. You never want to be a “go to cash” person entirely, but if you’re involved in the market and it’s hard to move in and out, I wouldn’t recommend selling everything, but at least consider financial protection. Volatility isn’t so high that put options might not be a bad idea for some people. Because I think what’s next is big asset price deflation, which will force central banks to do what we know they will: accept higher inflation to protect final demand.

Jim Puplava:
All right, we’ll end on that happy note and hope things get a little better.

Greg Weldon:
I’m very positive about life, Jim. This is when you have to separate yourself from the craziness. Doing what we do is tough to begin with—one day you hear we’re close to a negotiation, the next day it’s another attack. You can’t trade on these ridiculous headlines. I’m not anti-Trump—I like a lot of his policies—but his mouth is his worst enemy. If he could just keep quiet and do the job, we wouldn’t be here. I wrote a piece recently called “Me and My Big Mouth,” about Trump flip-flopping and making all-in bluffs that end up folding. When Iran is outplaying us, it’s a sign of how weak the U.S. position has become. It’s unfortunate and it pains me to say it, but it’s the truth.

Jim Puplava:
Greg, as we close, tell our listeners about Global Macro Strategy.

Greg Weldon:
Sure—the point is: get outside, do something fun, rate your will to live, because sitting in your office all day can be rough right now. The Global Macro Strategy report covers global stocks, currencies, bonds, energy, metals, and commodities. Shoot me an email—gregweldon[at]weldononline[dot]com—for a free trial, something we don’t usually do.

If you’re an accredited investor, I am a Series 3 licensed commodity trading advisor. We offer individual managed accounts—fully transparent, no lockups, daily broker reports. We’re trying to help people get the returns needed to stay ahead of the debasement of the dollar’s purchasing power. Also, check out our podcast, “Money Markets and New Age Investing,” hosted by Buzzsprout. Find me on Twitter @WeldonLive and the podcast at Money Podcast.

Jim Puplava:
All right, Greg, I’m going to go have a drink. As always, thanks for coming on the show. We’ll talk to you again.

Greg Weldon:
My pleasure, Jim. You and Chris do a great job—kudos to you both.

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