BCA Weekly Commentary 5/14/21: Too Much Growth vs Too Little


SUMMARY. Our core assumption for our 7 model portfolios continues to be for 2022 to see slower overall economic growth. To be clear THIS IS NOT THE CONCENSUS thinking in fact quite the opposite currently. Our assumptions are that the multitude of economic headwinds which include higher taxes, inflation, debt and political polices will switch worries from too much growth & inflation to too little as we head thru the year. This week we saw retail sales for April disappoint while last week employment and corporate earnings maybe next. Focus remains on whether current inflation is permanent or transitory and weaker growth as crazy as it seems appeared to pacify overall market risk on Friday. We believe the possibility of stagflation ie high inflation & low growth is a possibility going into 2022 although we have more conviction on the slow growth side.


INVESTMENT IMPACT. Cash/bond allocations especially in growth models are at record levels with cash/bonds in our most risky model BCA Aggressive Growth now exceeding 30% and hedges in place (ie short semiconductors). Overall equity exposure is well below 50% with hedges included. As a reminder that model is targeted for 95% equity exposure to demonstrate how conservative we are at this point. Volatility is high (given uncertainties on inflation) and may remain so as rotations from growth to value and into and out of stocks heavily short waning & ebbing. Overall, we find it is difficult to uncover long-term value in many assets and as a result we remain very selective on portfolio additions. In sum, we are more focused on capital preservation than growth until such time valuations get reduced. That to some extent has started in many high growth names.


Our model portfolio performance has been updated on our website as of 4/30/21.


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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