Q2, 2023: Tick Tok

Growth, Inflation & Policy As of April 23, 2023 GDP & Inflation Over the quarter, inflation continued to tick lower. Despite the recent banking system instability and the collapse of two large banks in the U.S. in mid-March, the Federal Reserve has continued to hike rates. The most recent rate hike highlights the predicament that the…

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Q1, 2023

SUMMARY As of April 17, 2023 Both U.S. and international equity markets rallied in the last few days of March to end the month (and the quarter) with positive returns. As long-term interest rates stabilized, U.S. bonds recovered most of February’s losses, ending the quarter at January-month-end levels. Despite a barrage of economic and policy…

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Q1, 2023: Money Like Water

Growth, Inflation & Policy As of January 3, 2023 INFLATION AND GDP Despite inflation starting to slowly tick lower over the last quarter, the probability of the U.S. heading into a recession in the next 12 months has become almost certain. Bloomberg’s recession probability model has correctly predicted a recession within 12-months every time the series…

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Q4, 2022

SUMMARY As of January 18, 2023 As inflation showed signs of slowing in the fourth quarter, both stocks and bonds recovered some of their losses from previous quarters, and most assets ended the quarter with positive returns. Despite a relatively good final quarter, 2022 was one of the worst years in history for markets, including…

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Q4, 2022: Whac-A-Mole

Growth, Inflation & Policy As of November 1, 2022 INFLATION, GDP AND VALUATIONS Historically low inflation has led to strong asset returns and structurally higher equity multiples, but there may be a return to a more volatile macroeconomic regime. Even though inflation (as measured on a year-over-year basis) is expected to roll over, this does not…

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Q3, 2022

Summary In the first half of the quarter, stocks and bonds rallied on the hopes of a Fed policy pivot, but a sharp reversal in the second half brought new highs for bond yields and new lows in stocks for the year. Investors reacted especially negatively to Federal Reserve Chair Jerome Powell’s August speech at…

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Q3, 2022: When Doves Cry

Growth, Inflation & Policy INFLATION TRENDS Cleveland Fed inflation nowcast for July is currently at 8.9% Y/Y, not providing significant relief from June’s surprise upside surprise of 9.1%. Inflation needs to come in below 0.5% in July M/M in order to decelerate. For reference, for CPI to subside to 5% Y/Y, inflation needs to come…

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Q2, 2022

Summary The past six months have been the worst start to a year for a traditional “60/40” portfolio since 1932 when the U.S. economy was in the Great Depression. Commodities and energy stocks served as rare bright spots in the first half of 2022, up 18% and 32%, respectively. After being dovish for most of…

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Q2, 2022: A Nickel For Your Thoughts

Growth, Inflation & Policy SLOWING GDP GROWTH Growth is unquestionably decelerating, while inflation prints are seemingly perpetually overshooting. Coming into the year, we believed inflation would be the key driver of economic and capital-market returns. Putin’s invasion of Ukraine has only served to intensify this critical dynamic and has put the Federal Reserve in a…

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Q1 2022

Summary For the second time in two years, the global economy was thrust into a crisis, first from a pandemic and then from Russia’s invasion of Ukraine. Commodity prices rose substantially as already-strained supply chains were further disrupted and the world tried to realign itself to friendly exporters. Even though the Russian ruble initially collapsed,…

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