Updated: Apr 25, 2022
ECONOMIC IMPACT. Focus this week shifted from war worries to recession worries and rightly so. With both interest rates and inflation at yearly highs the Treasury yield curve has inverted from 2 year Treasury rates to 10 year meaning longer term rates are higher than shorter a clear recession indicator historically. Further, although oil prices may have peaked they rose 50% off their base yet another recession indicator historically. Lastly, the inflation of the 1970's was only stamped out via an engineered recession the Reagan in 1982. Using this as a guideline it appears the current Fed course may in fact need to move beyond just slowing the economy but outright contracting it like in 1982.
INVESTMENT IMPACT. Our conviction on being overweight healthcare has never been greater given our negative outlook on economic growth. Over the past 2 weeks we have trimmed positions in higher concentrated stocks in models as they rose adding to other positions which we deem of lower valuation.
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 3/31/22.
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