Weekly Summary

Market Commentary

Market Commentary

As discussed in our 2022 year ahead outlook “Get Your Lies Straight”, we anticipate elevated market volatility throughout this year as policy makers navigate the trade-off between inflation and growth. Thus far, our expectations are playing out and the velocity of the recent downturn in global equity markets has certainly grabbed the attention of investors.

Market Commentary

Market Commentary

Today’s volatile markets are not a surprise to us. As we stated in last week’s commentary: “We continue to expect ongoing volatility in financial markets.” We also highlighted that the Omicron variant “will be a continuing concern. Its ultimate effects on economic activity and financial markets remain unknowable. We view the latest downturn in interest rates as problematic.”

Never Said it Would be “Smooth Sailin’”

The rather abrupt changes in interest rates and the shape of the yield curve show that quick sentiment changes often lead to quick changes in financial markets. The great dispersion of investors’ views on economic growth rates, supply chain disruptions and inflation make the financial markets more susceptible to sudden shifts in sentiment.

Help Wanted: Outstanding Global Weather Forecaster

Help Wanted: Outstanding Global Weather Forecaster

We believe that the upcoming winter temperatures will be determinative in regard to economic growth rates, as well as the levels and persistence of inflation for at least the intermediate term. We expect interest rates to continue their ascent as inflation proves to be more persistent and higher than generally assumed.

Will Energy be the New Delta?

Will Energy be the New Delta?

Global government policies that encourage the development of “renewable” sources of energy will continue to be very uncertain as to when tangible results that would help solve many of our energy issues will be forthcoming. We expect that China’s increasing regulations and scrutiny over its economy could become more unpredictable in terms of their content and timing.

Downturn is Transitory

Downturn is Transitory

So far, consumer inflation expectations seem to be rising in a very consistent pattern for many months. Consumers seem able to look past the more variable monthly statistics on inflation, employment and economic growth rates.

Positioning

Positioning

When investor “positioning” has become extreme, market sentiment can shift very quickly. Given the extreme dispersion of investor opinions about inflation, economic growth rates, employment, etc., sometimes a lack of positioning ahead of a significant data point can also lead to surprising market reactions.

Beyond Peak Growth

Beyond Peak Growth

Weekly Summary: August 23 – 27, 2021   Key Observations: Post peak economic growth can still be very favorable for Value and Cyclical stocks, as well as for equities overall. Given the great dispersion of economic growth and inflation expectations, shifts in...

Uneven But Not Broken

Uneven But Not Broken

The Delta variant experience of India, which has a very low vaccination rate and the U.K., which has a relatively high vaccination rate, both show that Delta variant infections tend to rise quickly but also seem to dissipate rather quickly. Higher vaccination countries like the U.S. should see only a relatively slight delay in its economy more fully reopening.