BCA Weekly Commentary 6/25/21: Sugar Rush 2.0 (Fiscal Stimulus)
Updated: Jul 2, 2021
SUMMARY. Our core assumption for our 7 model portfolios continues to be for 2022 to see slower overall economic growth. Overall, the economic data over the past few weeks supported this as stats continue to be weaker than expected. Having said that, it appears that ANOTHER round of stimulus will come in the form of an infrastructure bill and with it a host of tax increases (which may mute the growth impact). Although this may provide another economic boost to support growth we still believe the economic data will succumb to weakness in 2022 as we are stunned by the multitude of policies that are ANTI-GROWTH vs pro-growth. As we mentioned many times in past, the use of artificial growth boosts such as fiscal and monetary policy aren't free given high levels of debt and already trillions pumped in the monetary system world-wide. We already seen the result as inflation has risen considerably in part by this. Although, inflation may wane some it will likely remain elevated given gov't use of such polices to provide the appearance of boosting growth. And like 3rd world countries this may continue until the populace's standard of living erodes to a breaking point. That breaking point is not being able to afford basic necessities which may continue to rise in price faster than wages/income.
INVESTMENT IMPACT. This week we eliminated hedges given brightening prospects of an infrastructure spending deal which by a large may push slower growth out further into 2022. However, such additional growth like other stimulus packages may prove temporary and that's what we expect. Cash levels overall remain slight elevated across models and for the week we added to existing positions and initiated new positions in stocks that we deem can grow with reasonable valuations thru an economy that may weaken. Further, given the lack of value in the market, our position concentration remains relatively high in some names which we believe will be temporary. Although this hindered relative performance over past months, we deem this prudent in maintaining positions that may hold favorable risk/reward and that may hold value.
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.