Back to highlight a few things.
The following points from my last post remain relevant:
Further Thoughts on Sea Change, memo from Howard Marks which is a continuation of the one noted here. Sadly was made public 4.5 months after it's publish date.
I think Howard hits the nail on the head. Normalcy, not cataclysm, is what is ahead of us. A market where the clearing mechanism works properly, poorly run companies default, and misallocated capital accordingly produces weak or negative returns.
I also don't think we're there yet. The Fed's fight is a slog and is likely to continue until long after we see bear steepening of the US yield curve. As far as I'm concerned, it is precisely time that matters at this point. Whether the Fed raises one more time or not may be moot, it is the "longer" part of "higher for longer" that I expect to see play out.
The following points from my last post remain relevant:
DislikedI think the most relevant, and mispriced, risk right now from the market's point of view is that US inflation accelerates.Ignored
Dislikedthe roles of duration in the "soft landing" case for risk assets in the form of:
- daily volatility eating away at the incremental misallocated dollar;
- the slow and constant drip of transaction costs;
- underlying growth, accruing a day at a time and stepping closer to US equity expectations;
- normalization of higher prices in real expectations;
- allowance for the realization of productivity gains;
- continued changes related to market participants, outlined in the post above and the paragraph prior to this.
Ignored
QuoteDislikedIn other words, after a long period when everything was unusually easy in the world of investing, something closer to normalcy is likely to set in.
QuoteDislikedI have no reason to believe that the recession most people believe lies ahead will be severe or long-lasting. And with valuations high, but not terribly so, I don’t think a stock market collapse can reasonably be predicted. This isn’t a call for dramatically increased defensiveness.
I think Howard hits the nail on the head. Normalcy, not cataclysm, is what is ahead of us. A market where the clearing mechanism works properly, poorly run companies default, and misallocated capital accordingly produces weak or negative returns.
I also don't think we're there yet. The Fed's fight is a slog and is likely to continue until long after we see bear steepening of the US yield curve. As far as I'm concerned, it is precisely time that matters at this point. Whether the Fed raises one more time or not may be moot, it is the "longer" part of "higher for longer" that I expect to see play out.
Live Challenge All Time Return:
171.5%