BAPI

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? 

BakerAvenue Prudence Indicator Says... 

Long-term: Positive   |   Short-term: Neutral

The Upcoming Policy Push

"Though we see the same world, we see it through different eyes.” – Virginia Woolf

As negotiations over the largest tax increase in fifty years and the largest spending package in a hundred years heat up, there is little doubt we are entering the primetime for policy actions. Toss in a debt ceiling debate and Fed Chairman election, and the headlines coming out of Washington this Fall will be important to monitor. August closed out seven months of positive returns (S&P 500) with several indices reaching all-time highs. What should investors expect as the legislative calendar heats up?

All-Time Highs, Meet the Dog Days of Summer

"There are always flowers for those who want to see them." - Henri Matisse

July closed out six months of positive returns (S&P 500) with several indices reaching all-time highs. Despite the strength, headlines related to COVID variants, China regulations and peak growth pressured the reflation narrative and made for some volatile asset class moves. What should investors expect as we move through the dog days of summer?  

"The question is not what you look at - but how you look and whether you see."
- Henry David Thoreau

Shifting Narratives
The reflation narrative, born out of reopening economies and historic stimulus, helped power shares of economically sensitive companies higher after nearly a decade of underperformance. However, over the past several weeks, pandemic beneficiaries have outperformed reopening trades. Growth stocks have trounced value stocks, commodities have lagged, and Treasury yields, which peaked this year at the end of the first quarter at 1.8% (10yr), have moved steadily downward toward 1.3%.