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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Q1, 2022: Candyland

Growth, Inflation & Policy SLOWING GDP GROWTH Growth is unquestionably decelerating, while inflation prints are becoming increasingly important. Should we see inflation accelerating from here, expect fireworks. If inflation however starts to decelerate, it could be a decent year for risk assets. While we are watching inflation as the primary driver of outcomes this year,…

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Q4 2021

Summary ​​Equity markets delivered positive returns in the final quarter while fixed income returns were flat. Due to an improving labor market and stubbornly high inflation levels, policymakers are set to reduce the unprecedented fiscal stimulus and unsustainable levels of monetary policy accommodation. ​​​​​​ Inflation became officially politicized when Democratic Senator Joe Manchin of West Virginia cited…

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