I sure hope that Janet Yellen is correct, and inflation is transitory and not out of control (see here and here). I hope everyone enjoyed Halloween, a day filled with silliness and fun. To that point, I treated myself this past week to a package of 16 choice Halloween beers and discovered that my taste buds for such beer had better be transitory! What can I say – my treat had better be worth that price of $74.72, or almost 3 cases of Budweiser. My takeaway from all this is that, while people feel more confident in their financial circumstances, they will also take more investment risks – and yes, treat themselves to more treats. In 2021 and in early 2022, I suspect this will continue to be the case. However, where will such confidence falter? Will it be as a result of stagflation, where companies feel the pinch and where costs exceed the offsetting price increases? I worry that wage inefficiencies that have bolstered consumer confidence will be reversed by a rationalization of responsible spending. I mean, wouldn’t most people prefer to drink half as many Budweiser beers and still have some money left over? Okay, by the way, I admit that this silly example represents the Halloween exception, and not necessarily the rule. Nevertheless, with gas prices now in the range of $4 to $5, there can be no question that inflation is real and global. To this point, note that Goldman Sachs economist Jan Hatzius said the Fed will raise its benchmark from a range of 0 to 0.25% soon, after it stops tapering its massive asset-purchase program, and then raise rates “two times a year, after that in 2022.” True or not? What’s a fixed income holder supposed to do?
Betting Odds that Fed Chairman Powell’s Reign will be Transitory
We live in a “new world,” where trust of centralized figure heads is not embraced easily, so forgive me for not just accepting the word of our Treasury Secretary. As they say, “hope is not a strategy.” To that point, according to Predictit, we recently noted that Jerome Powell’s probability of getting re-elected as the head of the Federal Reserve declined from 76% to 71%, as of October 22, 2021. Needless to say, having a new Federal Reserve Chairman in the midst of policy questions would not be a great confidence builder. We think this is a real risk for markets, and something that way too many investors take for granted in the midst of tremendous fiscal and monetary policy questions.
Again, people so often focus on the risk in the equity markets and other traditionally high beta investments. However, these days we would be focused more on the volatility in the bond market, the utility sector and commodities. The trick to good investment returns in 2022 may come from balancing the greed factor, and not seeking too many treats
This week, we welcome Chris Sullivan, President of MacMillan Communication, to our Thursday Happy Hour. We admit that we are big proponents of self-promotion, and we have worked with Chris. We believe that our Happy Hours are meant to be fun, interactive and constructive with challenging discussions. In this week’s event, we will highlight a couple of thoughts. (1) Let’s face it: getting recognized as a source of information by the media can be helpful for business, but your preparedness to answer questions is also important. (2) How does strong social media presence help engagement with the press? (3) The importance of media training and practice. (4) A discussion around the necessity of integrity from authors and editors, by leading with catchy titles that are actually aligned with the story. A better headline for this article, to catch more readers, could have been “Fed Chairman Jerome Powell is Drunk on Inflation.”
All investments involve risk, including possible loss of principal.
The information provided here is for financial professionals only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.
All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.
Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.
The value of investments and the income from them can go down as well as up and investors may not get back the amounts originally invested, and can be affected by changes in interest rates, in exchange rates, general market conditions, political, social and economic developments and other variable factors. Investment involves risks including but not limited to, possible delays in payments and loss of income or capital. Neither Toroso nor any of its affiliates guarantees any rate of return or the return of capital invested. This commentary material is available for informational purposes only and nothing herein constitutes an offer to sell or a solicitation of an offer to buy any security and nothing herein should be construed as such. All investment strategies and investments involve risk of loss, including the possible loss of all amounts invested, and nothing herein should be construed as a guarantee of any specific outcome or profit. While we have gathered the information presented herein from sources that we believe to be reliable, we cannot guarantee the accuracy or completeness of the information presented and the information presented should not be relied upon as such. Any opinions expressed herein are our opinions and are current only as of the date of distribution, and are subject to change without notice. We disclaim any obligation to provide revised opinions in the event of changed circumstances.
The information in this material is confidential and proprietary and may not be used other than by the intended user. Neither Toroso or its affiliates or any of their officers or employees of Toroso accepts any liability whatsoever for any loss arising from any use of this material or its contents. This material may not be reproduced, distributed or published without prior written permission from Toroso. Distribution of this material may be restricted in certain jurisdictions. Any persons coming into possession of this material should seek advice for details of and observe such restrictions (if any).