"Anatomy of a Bear Market" by Russell Napier is a "must-read" manuscript. Given current market dynamics, a review seems timely. As my colleague, Richard Rosso, CFP, previously penned:
Even though the term “stagflation” remains an unconfirmed fear for investors as they try and draw parallels to the 1970s, that does not mean that opportunity does not exist. Rather, it is quite the opposite. A proper understanding of the intricacies of stagflation would indicate that gold, soft commodities, floating-rate bonds, short-term corporate bonds, and legacy non-agency RMBS remain the key asset classes that investors should seek to gain exposure to not only mitigate stagflation risk but to generate higher risk-adjusted returns as well.
Oil spikes have historically negatively impacted economic outcomes. As the chart below shows, oil spikes typically are short-lived due to some exogenous geopolitical event. However, as was the case from 2003-2008, fundamental concerns, in this case, the fear of "peak oil," can lead to more extended periods of higher prices.
Greedy corporations are not causing inflation. Such is despite the claims of many of those on the political left that failed to understand the very basics of economic supply and demand.
Greedy corporations are not causing inflation. Such is despite the claims of many of those on the political left that failed to understand the very basics of economic supply and demand.
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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