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BCA Weekly Commentary 10/07/22: Prepared For Stagflation

ECONOMIC IMPACT. The combination of higher rates, limited fiscal and monetary support and elevated debt may result in a prolonged period of no growth and elevated inflation. Rates may stay elevated to sometime as well, but we reiterate that additional rate hikes may tip the scales to recession in coming quarters. Infact, signs are readily evident it maybe immenent as corporate earnings decelerate at an alarming rate especially in consumer sector. It may take post mid term election for this to show up in economic data to prompt Fed to take foot off hiking.

INVESTMENT IMPACT. Elevated interest rates and no economic growth may not be a good backdrop for growth stocks especially when valuations remain elevated ex smaller companies. Growth multiples may contract further as rates remain elevated. So where do turn to in a zero growth environment with elevated inflation? In our opinion those companies with attractive yields where clients can get paid to wait for better times. Thus, we have almost completely turned over models towards yields vs growth. Specifically, even our growth models yields are well over 3% currently.

We remind investors that going forward expectations for returns for the overall market over the next decade remain low as we expect well below returns vs history. Be that it may we are hopeful our models can improve on that going forward.

Our model portfolio performance has been updated as of the date of this newsletter.

For more insights see our website and disclosures found there at BCA. The thoughts contained in this newsletters are intended lend insights into BCAs current & future thinking on changes to BCA model portfolios. They are not intended to be recommendations and should not be taken as such. As always contact us for further explanation of how these events can affect your finances. To unsubscribe from our newsletters & website please email us with "unsubscribe" in the subject.

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