BAPI

BakerAvenue Prudence Indicator Says... 

Long-term: Neutral   |   Short-term: Neutral

Feeling the Heat

“The noblest pleasure is the joy of understanding.”

– Leonardo Da Vinci

A tricky summer for the markets is underway. “Peak inflation” continues to be elusive, growth is slowing and macro ambiguities abound. While asset prices and depressed investor sentiment reflect the uncertainty, the ever-changing narratives and whipsaw patterns are playing with investors’ nerves. As always, we defer to our technical, fundamental, and macro disciplines to assess the risks and guide our outlook.

BakerAvenue Prudence Indicator Says... 

Long-term: Neutral   |   Short-term: Neutral

Finding Equilibrium

“The present is the ever-moving shadow that divides yesterday from tomorrow. In that lies hope.”

– Frank Lloyd Wright

Markets are trying to strike a fragile balance between hope that inflation is peaking and fear of a recession. Growth is slowing just as financial conditions tighten, but we suspect prolonged recessionary conditions can be avoided. Volatility has remained elevated, and investors are sure to remain on edge as the path to a soft landing is narrow. As always, we will defer to our technical, fundamental and macro disciplines to assess the risks and guide our outlook. 

BakerAvenue Prudence Indicator Says... 

Long-term: Neutral   |   Short-term: Neutral

The Narrow Runway

“The triumph can't be had without the struggle.”

– Wilma Rudolph

Interest rates around the world continue to move higher. Central banks are intently raising borrowing rates to help curb inflation, while geopolitical volatility and stubborn lockdowns are pressuring economic growth. Investors should keep their seat belt on as policy tightening into a slowing economy is tricky business; an anxious investor base is watching closely to see if they can stick the landing. As always, we will defer to our technical, fundamental and macro disciplines to guide our outlook.

BakerAvenue Prudence Indicator Says... 

Long-term: Positive   |   Short-term: Neutral

Braking, Not Breaking

“You'll never find a rainbow if you are looking down.”

– Charlie Chaplin

Financial conditions are tightening, spearheaded by the Fed’s desire to slow growth and keep inflation in check. Bond yields have surged higher, and commodities have spiked as the volatile geopolitical backdrop adds to an already anxious investor base. Encouragingly, the developments are happening at a time of strong employment and record corporate profitability that should blunt the sting of a more restrictive policy. We see the economy braking, but not breaking.

BakerAvenue Prudence Indicator Says... 

Long-term: Positive   |   Short-term: Oversold

The Fog of War

“There are some things you learn best in calm, and some in storm.”

–Willa Sibert Cather

Russia’s attack on Ukraine has injected material uncertainty into the capital markets. Risk appetites have disappeared, and financial conditions have tightened, driven primarily by the spike in commodity prices. The world has settled into an uncomfortable war of attrition, with investors pondering the circumstances and timing of de-escalation or worsening global economic drag. Encouragingly, the invasion and corresponding market correction are happening against a backdrop of strong economic growth and record corporate profitability.  

BakerAvenue Prudence Indicator Says... 

Long-term: Positive   |   Short-term: Oversold

Getting Comfortable With Being Uncomfortable

“Worry never robs tomorrow of its sorrow, it only saps today of its joy.”

– Leo Buscaglia

From monetary and fiscal policy headwinds to Covid and supply chain tailwinds, we continue to see 2022 as a transformational year. The capital markets are adjusting to a more normalized backdrop, and volatility is the uncomfortable companion going along for the ride. Encouragingly, the adjustments (e.g., interest rates, growth rates, valuations, etc.) are happening against a backdrop of strong economic growth and record corporate profitability. Investors are skeptical, but in time should get comfortable with the new backdrop.

BakerAvenue Prudence Indicator Says... 

Long-term: Positive   |   Short-term: Neutral

The Winds of Change

“It is better to know some of the questions than all of the answers.”

– James Grover Thurber

After a run of historically low interest rates, catalyzed by accommodative monetary and fiscal policy, signs are emerging that change is in the air as we move into 2022. Encouragingly, that change is happening against a backdrop of strong economic growth and record corporate profitability. From monetary and fiscal policy to Covid and supply chains, we see 2022 as a transformational year. How should investors be positioned as the winds of change blow through the capital markets? 

BakerAvenue Prudence Indicator Says... 

Long-term: Positive   |   Short-term: Neutral

Thinking Through 2022

“It is better to sleep on things beforehand than lie awake about them afterwards.”

–Baltasar Gracian

Markets have become choppier with the Federal Reserve turning hawkish just when the Omicron variant has revived growth scares. While the last few weeks are a reminder that uncertainty remains elevated, we continue to see more positives than negatives in our long-term outlook. A new year is upon us, and we enter it with guarded optimism. What should investors monitor as we consider close out the year and look to 2022?

BakerAvenue Prudence Indicator Says... 

Long-term: Positive   |   Short-term: Neutral

Channeling Goldilocks

“It is always the simple that produces the marvelous.”

– Amelia Edith Huddleston Barr

The market narrative has quickly shifted from inflation-based (or stagflation-based) agitation to something more akin to a goldilocks scenario. Patient central banks have pushed back on the recent move higher in interest rates, while economic data is proving resilient and Q3 earnings keep coming in strong. The ‘not too hot (policy), not too cold (growth)’ backdrop continues to present a supportive market backdrop. What should investors watch for as we move into the final months of the year? 

BakerAvenue Prudence Indicator Says... 

Long-term: Positive   |   Short-term: Neutral

Some Tricks, Some Treats

“Wisdom lies neither in fixity nor in change, but in the dialectic between the two.” – Octavio Paz

Volatility has picked up as the debate surrounding fiscal and monetary policy, coupled with stubborn supply chain constraints, raises investor anxiety. Markets were lower in September, with the S&P 500 logging its first decline since January and its worst month in a year. A recovering global economy, together with improving Covid trends, offers a more optimistic outlook. What are the potential tricks, and treats, investors should watch out for as we move deeper into the fall?