BakerAvenue Prudence Indicator Says...
Long-term: Neutral | Short-term: Neutral
Seasonal Stabilization?
“The question is not what you look at - but how you look and whether you see.”
– Henry David Thoreau
BakerAvenue Prudence Indicator Says...
Long-term: Neutral | Short-term: Neutral
The Death of TINA?
“It's worth remembering that it is often the small steps, not the giant leaps, that bring about the most lasting change.”
– Queen Elizabeth II
For the longest time, lower interest rates meant that, for most investors, There Is No Alternative (TINA) to stocks and like assets to meet long-term financial objectives. With yields backing up across the curve, risk-free rates have moved from an afterthought to a consideration and the bar for sustained outperformance has been set higher. While the new rate backdrop will make the recovery road bumpy, we do not think it is enough to short circuit growth.
BakerAvenue Prudence Indicator Says...
Long-term: Neutral | Short-term: Neutral
A Lesson in Positioning
“You know more than you think you know, just as you know less than you want to know.”
– Oscar Wilde
The tricky summer for investors continues with July posting the best return in eighteen months. While there was some encouraging traction behind the peak inflation and Fed tightening narratives, as well as better than expected earnings, we suspect depressed sentiment and positioning may have played the biggest role. Macro uncertainty is still elevated, but we are encouraged by the recent progress. Nevertheless, the back half of the year will have plenty in store for investors. 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
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?