Updated: Dec 15, 2021
Expectations of a hardline on inflation as the Fed meets this week are becoming clearer. Many investment banks such as Morgan Stanley & Goldman are not only expecting an accelerated taper (ie less money printed) to be announced this week but a series of rate hikes beginning next year. The fragility of demand already created by run a way inflation is becoming becoming clear. According to the CPI inflation is at 6.8% year over year a 30 year high (vs real inflation as measured by actual goods bought every day closer to 2-3X that) thid may take an additional bite into growth in 2022. The chances of a policy error whereby growth slows to a trickle is ever greater thus the recent volatility in the stock market.
INVESTMENT IMPACT. For most of the year we have highlighted the above risks to growth going into 2022 and that conviction has only grown. Portfolios for most of year have been over-weight health care despite major divergences of the tech vs health care as illustrated with the SOXX (semiconductor index up 40% despite its dependency on high economic growth) vs IBB (Biotech index up less than 2% little dependency on economic growth). As we move into 2022 our expectations are that it may FLIP as investors shift from high growth high inflation to low growth lower inflation and assets which health care may fair better grow wise. We remain overweight Healthcare thus little changes in our overall model portfolios.
Our model portfolio performance has been updated on our website as of 10/29/21.
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