Weekly Summary

“Hot N Cold”

“Hot N Cold”

. We understand that the Fed’s latest planned trajectory of hikes in the federal funds rate has increased the probability of a U.S. recession by sometime next year. It has also lowered the risk/reward calculus for the purchase of equities. As we have advocated this entire year, we would only buy selected securities on market downturns. We maintain our belief that selective stock picking will continue to play a critical role in outperformance.

“Whatever It Takes”

“Whatever It Takes”

We are not at all surprised by the extreme volatility in financial markets post the Fed meeting this week. The Fed’s new approach has lowered the risk/reward calculus for equity levels. Long-term investors should be prepared to live through a period of increased volatility. Advantageous buying opportunities will continue to appear on a selective basis. Prudent stock picking should lead to outperformance over time. Patience will be important in seeking to achieve positive returns.

“Baby What You Want Me to Do”

“Baby What You Want Me to Do”

Our general investment approach remains the same as depicted in last week’s commentary. We maintain our preference for big cap high quality stocks with good balance sheets, relatively stable cash flows and stable margins. Continued volatility among sectors this week is supportive of a well-diversified portfolio for long-term investors.

“Eye of the Tiger”

“Eye of the Tiger”

Our general investment approach remains the same as depicted in last week’s commentary. We maintain our preference for big cap high quality stocks with good balance sheets, relatively stable cash flows and stable margins.

“As It Was”

“As It Was”

We continue to foresee financial market volatility and we maintain our conviction that equities should only be purchased on market downturns. We surmise that selective stock picking will continue to play a critical role in outperformance. We accept that low liquidity and one-sided positioning will continue to play a significant role in financial markets as these factors probably will exacerbate market volatility. Seasonal factors may also play a role in market volatility. Historically, September is the worst performing month of the year in this century. September and October typically also have high levels of volatility. But the good news is that U.S. mid-term election years have a strong finish and that typically Q4’s are the strongest quarters of the year.

“Don’t Stop ’til You Get Enough”

“Don’t Stop ’til You Get Enough”

Our general investment approach remains the same as depicted in last week’s commentary. U.S. interest rates continued to rise and the two-to-10-year yield curve generally steepened even as it remained inverted, much as we anticipated more than two weeks ago.

“Patience”

“Patience”

We continue to foresee financial market volatility and we maintain our conviction that equities should only be purchased on market downturns. Absent a severe U.S. recession, we view the significance of a “soft” Fed pivot as we have outlined, as enabling a long-term investor to be more “comfortable” buying selected stocks given the lessened probability of U.S. equities approaching the low levels of this year.

“All Along the Watchtower”

“All Along the Watchtower”

Weekly Summary: August 8 - August 12, 2022 Key Observations: U.S. inflation most likely peaked in July. Although we foresee a downward trajectory of inflation rates, we assume that they will come down in an erratic pattern and take quite some time before the Federal...

“Cold Heart”

“Cold Heart”

Weekly Summary: August 1 - August 5, 2022 Key Observations: A critical component of our “soft” pivot narrative for the Federal Reserve (Fed) expounded in last week’s narrative is our assumption that the U.S. economy continues to slow. The economic data we reviewed...

“The Scientist”

“The Scientist”

Weekly Summary: July 25 - July 29, 2022   Key Observations: We characterize the Federal Reserve’s (Fed) latest policy stance as relatively dovish, and we label this stance as a “soft” pivot. Given our assumption of peak headline inflation and our observations of a...