May 26th 2022
Momentum for investors is Shifting.
I am pleased to announce that there is a glimmer of hope waiting around the corner.
In 2022, our leadership tasked the Federal Reserve, a 100-year-old institution, to use its blunt tools (i.e., raising interest rates) to lead the war on inflation.
In my professional opinion, this is the wrong solution, and it shows a lack of understanding of how to fix our problems. The stress we are experiencing in the financial system is beginning to violate credit and lending mandates set out in the bylaws of the Federal Reserve.
This is the beginning of hope and a return to progress for all investors.
Here is how I believe the summer is going to go down:
The stress in the financial markets causes the Federal Reserve to stop their plans on rate hikes, and companies see the impending slowdown on their balance sheets and start laying off people.
Inflation may come down on its own from its current levels from demand destruction. Regardless of the scenario, this data will be picked up by politicians eagerly trying to get reelected.
Their plans to continue to push for rate hikes will come to a screeching halt. No one wants to move the economy into recession pre-election.
The focus will move from the FED to government policy changes that relieve stress barriers and global roadblocks to fix structural inflation.
There are some slight hints that this is already in motion in the White House, with the Asia Pacific Pact and bills in Congress being considered.
This will accelerate as the summer progresses.
On an investment front, I am beginning to see this shift in policy change in the bond market. This reliable indicator hints at things to come, foretells the end of rate hikes, and hints at actual RATE CUTS in 2023.
The bottom line is that by the end of the summer, something will change the direction of 2022. What can we do to help take advantage of this shift?
Below is my list of general areas of investment that should be considered.
Bonds (specifically treasuries)
Value ideas, such as utilities and insurance companies.
Precious metals do exceedingly well when policy direction changes.
Stay Tuned.
Regards
Christopher Lakian