Perspectives

Back during the Financial Panic of 2008, clickbait media kept screaming “Hyperinflation.” This theme was consistently pushed back against, and argued that inflation would not accelerate. Yes, Quantitative Easing and zero percent interest rates, which Ben Bernanke invented at the time, massively increased the size of the Fed’s balance sheet and boosted cash deposits and reserves at banks as the Fed printed money to buy debt – Treasury bonds, mortgages and other assets. So why didn’t th… View More

As the dust settles after a volatile first five months of the year, investors are biased to buy risk assets. Record or near-record highs are frequently recorded in various markets, including equities, credit, real estate, gold, etc. There is no shortage of investor liquidity.   Summary Equities increased (S&P 500 1.90%) last week, offsetting some of the prior week's loss. Highlights included lots of tariff crosscurrents and NVIDIA'S earnings. Best Sectors were real estate (2.75%) and tec… View More

The big discussion last week among investors was about the deficit and the impact on bond yields of the One Big Beautiful Bill (OBBB). A long-tail Treasury auction threw gasoline on this debate, which was already combustible. It has been noted that once net interest costs exceed 14 percent of tax revenue, bond markets pay attention to US fiscal policy. Interest costs are currently at 18 percent of tax revenue. Adding to this pressure is that Treasury will need to flood the market with debt issu… View More

With the first quarter earnings season nearly complete, earnings growth surprised to the upside, coming in at approximately 14%, well above the 8% expected at the start of the season. Revenue growth also exceeded expectations, coming in just under 5%. Despite concerns about tariffs during the quarter, corporate profits continued to advance. This marks the third time in the past four quarters that earnings have grown double-digit, suggesting that corporations remain in solid shape overall, even … View More

Good morning. We hope everyone had a great Mother’s Day. No rest in Washington this weekend with: (1) US-China trade talks leading to a 90-day reprieve of most tariffs ($300bn reduction annualized); (2) The first provisions of the tax bill released showing increases in the child tax credit, small business deduction, and estate tax exemption; (3) The middle-ground Medicaid changes taken in the first draft of the tax bill; (4) Trump readying his plan to impose large price controls on pharmaceut… View More

Many clients ask us why we manage our portfolios the way we do. Our management style is that of active managers, meaning we will overweight or underweight the companies represented by the S&P 500 index, considering certain fundamentals. These fundamentals include free cash flow, price-to-earnings ratio (PE Ratio), and increasing shareholder value like increases in dividends or stock buybacks that favor the shareholder. On the other hand, passive investing is investing in the indexes as they… View More

To the extent to which forecasts on the financial markets have largely been reduced to our collective reactions to utterances of policymakers who may or may not know any more than the rest of us, we’ve decided to keep things simple – presenting our base case as well as some facts we believe you should know:   Base Case: Recession odds are 45% in 2025 due to increased uncertainty regarding global trade and concomitant impact on capital spending/deal-making Unemployment claims (low), co… View More

We’ve expected a recession for more than a year now. Simply put…the Era of Easy Everything is Over. Expanding deficits and easy money (that have lifted the economy since COVID) are no longer with us. At the same time, tariff negotiations have created an unbelievable amount of uncertainty. Add it all up and we expect 0.3% real GDP growth in the first quarter. Consumers and businesses were front-running tariffs in Q1, trying to get as many goods as possible into the country as soon as possibl… View More

Before the long weekend, we wanted to share additional thoughts on: Can the US avoid recession, and can the stock market deliver positive returns in 2025? Consumer Confidence If so much good news exists, why is the market down? What about China and the tariffs? Won’t that cause hyperinflation? Isn’t the US alienating its allies and trading partners? Won’t this open the door for China to step in? Because there is much to cover here, we’ve divided it into sections so you can ju… View More

Quantitative Easing was different during COVID than during the Financial Panic of 2008. During COVID, M2 growth soared, while it was held back during the Financial Panic by much tighter liquidity controls on banks. That’s why we were among the first and very few who predicted much higher inflation due to COVID policies. After that, we remained wary of loosening monetary policy too aggressively because we feared that, in spite of a drop in inflation, inflation remained above the Federal Reserv… View More