Currently, depending on whether you are “bullish” or “bearish,” there is much angst over the prospect of higher inflation. If you are bullish, higher inflation is a reflection of surging economic growth. If you are bearish, higher inflation leads to rising costs and higher rates. However, we need a better definition of what inflation is.
The media is buzzing with claims of an “Economic Boom” in 2021. While the economy will most certainly grow in 2021, the question is how much is already “baked in?”
October was marked by continued volatility across fixed income and equity markets as investors faced various challenges, including persistent inflation concerns, rising yields, tightening monetary policy, and the backdrop of a U.S. Presidential election.
As an investor, it’s nice to know what we should expect from President Trump, because we have seen the movie before in 2017 – 2021. Apart from the early part of the Pandemic period, the economy and stock markets generally performed well.
Remember, our investment in stocks is a De facto vote of confidence on the economies in which we invest. Earnings, revenue, margins, free cash flow, and the growth of these important metrics is what drives stocks up or down over time.
The discretionary sector struggled as did all growth and quality-oriented areas of the market in 2022. That was a classic re-set and a raging opportunity to add exposure.
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