This is it.
The last Fed rate hike.
The last time you hear about inflation on the news—no more debt default nonsense.
We are going to move on!
I want to start June 2023 and continue the remainder of the year with positivity and opportunity for all investors.
This bi-annual letter applies to the young, old, conservative, and aggressive. We will cover international investments, domestic ideas, and fixed income.
I am optimistic we will have a very productive 2nd half. Inflation is coming down, and companies are re-aligning with older long-term business plans, exiting Covid protocols and mistakes.
There are several key drivers to my optimism, all worthy of discussion.
Global supply chains are being diversified across Asia, Japan, and Europe. This will help importing nations diversify away from single-nation issues and create opportunities for macro (top-down) investing abroad. The United States spent 20-plus years building up our largest trading partner, China. Now, we are moving to India, lower Asia, and back to Europe. Factories, supply chains, logistics, banks, etc., all need to be developed. This costs money, in turn making global stocks worth considering.
CPI domestically is headed lower! The market is pricing darn near flat to negative prints by late 2024. This is good for us! The key metric in measuring CPI is watching bond yields. You may have heard me mention it several times before. Lower yields allow higher prices to
Earnings multiples (P/E) for short. If the economy sustains its current path and inflation continues downward, the market will allow risk to expand this multiple to growth-type levels.
Disinflation helps the margins of consumer-based companies. Simply put, if a product costs less to make, you can sell it for more. The company makes a larger profit margin. (this looks more realistic over the next 6-18 months)
The US markets have already priced in a shallow recession; we have only fear of a more significant slowdown to manage at this point. I recognize this is a tired statement! Depending on where you live and what you do for a profession, you are either working hard and making a lot of money, or you are freaked at the lack of business. Our economy is very bifurcated at the moment. This will change, but it will take time. If you want to know which parts of the economy are in contraction vs expansion
, please reach out.
If you have questions, please let's meet up to discuss how 2023 will go for you and, most importantly, discuss how much risk you should take depending on your specific situation.
Regards Chris
Christopher R. Lakian
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