From peaks to valleys…and back again
There will always be ups and downs in
the financial markets. As with anything
cyclical, there are evolutions that occur over time. And time, after all, is the most significant variable
in investing. It is the “denominator”
for all calculations. It is also what
accounts for trends, whether they be cultural, financial, or political.
Nobody can predict the future with
absolute certainty. But we can measure
and “quantify” the variables that precede this moment in time to try and extrapolate the probability of
those variables, or others, from happening again.
Buying investments successfully is
all about integrating time, price, and duration to make a reasonable hypothesis
about the potential for capital appreciation.
Defining the intricacy of how
“things” interact with other “things” is the essence of successful portfolio
management. It is not an exact science
but rather the art of blending instinct with experience and raw data.
The “pundits” say…..
Given that, we are in an unusual
confluence of factors in the world today.
There are few periods in history when the globe was awakening from a
pandemic, regions of cultural conflict were erupting into violence, and the
immediacy of hunger and poverty lay mere miles from innumerable borders.
It is true that basic human behaviors
are eternal: the desire for security and opportunity; the protection of family
and property; the need to work; spiritual passion. These needs never extinguish.
Thus, we look at today’s market
landscape as a sign that despite the turmoil and volatility things are as they
should be. Perhaps not as we would like,
but cyclical, evolving, and identifiable nonetheless.
For example, there is quite a bit of
consternation about interest rates and consumer prices. As these two data points intersect and
parallel rise upwards, our government and central banks try their best to
arrest the trends. But I would argue
that higher prices and high interest rates are a fleetingly cyclical
manifestation of positive economic
developments stemming from a two year lockdown on commerce due to Covid
19. While the pendulum of these events
might currently be skewed too much in the extreme, one can view the opportunity
to benefit from these integers as historic and proportional. When was the last time you could “park” cash
at a 5% return? A slower economy never
offered you that chance.
Inflation, too, is impactful for
commodity prices and certain equities.
When pricing power was limited….only a decade ago…leveraging assets was
impossible. Although we acknowledge a
spiral of price gouging, this too is an opportunity for corporations to collect
returns on stagnant profits that nearly shut many of them down during the
pandemic. High unemployment and
devastating profit decline brought about a fear in the financial markets over
the last two years during which many portfolios suffered. Once again, the element of time lends us perspective about what we think we
are seeing versus what is actually happening.
One must be able to see the forest from the trees.
Today we continue to advise clients
that allocations are an evolving thing but the objective remains constant:
invest in unwavering refrains and companies that benefit the greater needs of
the human condition: food and water, energy, shelter and infrastructure,
education, technology, healthcare.
And because of that advice our track record over the decades is second
to none in securely managing the wealth of corporations, the affluent, and
institutions.
Let the traders roll the dice, we
prefer to take “crash” out of our vernacular.
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