Finish Medication!
Ahead of the pre-meeting quiet period, Fed officials have another week to push back on mounting suspicion that the most aggressive hiking cycle since Jerome Powell was a young man is nearing its end and may go into reverse later this year.
Although policymakers continue to insist that the peak for Fed funds is likely above 5%, markets aren't convinced. Following another relatively favorable CPI report, some began to ponder a pause as soon as March.
The official rhetoric has softened at the mar
Pre-Covid having already become an historical time frame; if 2% inflation was somewhat disassociated with interest rates would 4% interest have been detrimental?
Without the Bush tax cuts, it would’ve been easy enough to pull off.
Higher for longer, but not as far as the eye can see.
I fear that commodities will become the story again. While China is suffering through a very tragic reopening, there exists a strong possibility of revenge travel/consumption on the other side of ‘herd immunity’. Oil and copper are showing signs of a rebound.
The inflationary impact for energy’s comps are positive through 1h22, but the second half could have some very ugly prints if consumption in the US and EU hold up.
Wow!
This post is all signal spiced with (darkish and provocative) humorous undertones, as well. A great Sunday morning read.
There is the economy and there is the stock market. $4.3T is still sitting on the sidelines and even if people reinvest at the “old world” 60/40 ratio- it will be extremely difficult to perfectly time going from cash to bonds to equities and get the timing right. If 60/40 does hold, when that cash gets reinvested (already started?) – that’s a lot of buying power (on top of buybacks and 401-k automated purchases) into US equities, which in aggregate are valued at approximately $46T. SPY since 1970, in the aggregate, has beat annual inflation by 6.22%.
At the end of the day, the choice of how to invest is largely based on when people want to turn their investments back into USD- so when I hear someone’s complicated investment plan, it is kind of meaningless unless I also know what their cash flow needs are on an annual, or even a quarterly, basis through their expected date of death. Mine is 101.
Empty, I like your point here. I have estimated my cash flows and assets for another 10 years. I actually don’t really think I’ll be around that long, so all is well so far. My net worth was down 13% this past year but my income was up 8% and likely to rise about the same this year. Best of all, none of my investment income is needed for my cash flow needs, which are currently covered by SS and five fixed life annuities. In fact, investments provide two-thirds of my total income which which means I never have to sell. I’ve also noticed that half my portfolio is priced well above its basis, while the other half is below basis about the same amount. Lots of options.
Mr. Lucky, thanks. When I read your posts, I always remember that you are a “Bond man” and I am a “SPY”!
🙂
n=4 starting from the early 1960s, when cpi was hovering just over 1% for a few years