There are not many things I am certain about when it comes to the markets. In fact, Joule advisers pride themselves on being agnostic when it comes to market views and flexible enough to change opinions on a dime. Inflation however, is one thing we feel is coming at us with the certainty of a day’s sunset; which is just beginning to be confirmed by economic data, specifically in today’s Consumer Price Index (CPI) print, you’ll be hearing so much about from the major media.
While I know all of you devour each and every word I write about such riveting subjects (HA!), I won’t bore you by rehashing the inflation trade I’ve written about most recently HERE or not so recently HERE.
One does not have to be an economist with a PhD to connect the dots between higher raw material input costs such as copper, aluminum and steel, and the finished goods that consumers purchase day in and day out. The only question is, are we nearing the beginning or the end of this cycle, to which I can emphatically answer, ‘We’ve only just begun.’
While last week’s volatility resulted in our disciplined sales of a few investments, and even more cash holdings, many of our remaining names are already skewed towards an inflation bias and have remained relatively unscathed despite the general market drop. In addition, today’s economic data, supporting our thesis, has us taking our Gold position to 10% within our aggressive portfolios, pro-rated for moderate and balanced. It is important to understand that we are very early in this theme and it will take many years to really play out. I suspect some fits and starts along the way, but I believe our strategy is sound and our investment plan extremely well rehearsed.
While I remain very optimistic about hard assets, I’m not convinced that we’re completely out of the woods in the general stock market. Last week’s volatility was something we haven’t seen in quite a few years; and, unfortunately, may just be the beginning. I do believe however that this will lead to opportunities rather than being the start of a prolonged bear market. We now have the capital to take advantage of such bargains but must remain patient until they present themselves in such a way that they are simply too good to pass up.
Increased market volatility brings additional subject matter to discuss. We will continue to update you as newsworthy events unfold. We are also in the early planning stages of a webinar to be held in late March. We will send more details as they develop. In addition, baseball season is right around the corner and I have heard that ESPN has this year’s team ranked in the pre-season top 5. As head coach, I fully accept this pressure – I’m just not sure my 8 year- olds will handle the media attention all that well. Stay tuned…..
Until next time