In 2021, we made tactical moves in our investment portfolios to underweight US bond exposure, be overweight in real estate and build cash reserves for deployment in 2022 when we see volatility increasing due to headwinds. The US Barclays Agg (a moderate-duration bond index) is -4.31% from its high last year and only faces more losses in face of rising rates. The multi-decade bond rally is indeed over and in reality, it was only briefly interrupted by the pandemic. Our real estate exposure continues to out-perform other asset classes as the interest on leverage is still historically low (and often was refinanced to low fixed-rate over past years) and the asset values appreciate with inflation bringing total returns to the highest levels seen in years. Pensions and institutions continue to invest heavily into real estate in the new bond bear market. In this environment, keen asset selection can make value add purchase and development deals very profitable.
Markets seem primed to equate higher rates as being negative for equities. We’ve seen this before and don’t agree. What really matters is that the Fed is signaling slow and cautious rate hikes, supportive of minimal market impact. This historically muted response to inflation should keep real rates low, in our view, supporting equities and real estate. Stay invested and stay diversified for positive returns occur more frequently over longer periods than negative returns and policy is supportive of high-quality investing. Fundamentals matter.
With COVID cases rapidly falling and inflation heating up, many investors are focused on Federal Reserve policy. Monetary policy will need to walk a fine line between tackling inflation and financial risks and supporting the economic recovery. The Fed, Central Banks, and governments will need to act with clarity and consistency to avoid making policy errors that will roil financial markets and set back the global recovery. Congressional brinkmanship around the debt ceiling, government funding, the bipartisan infrastructure agreement and President Biden’s social infrastructure plan all risk increasing market volatility to even roiling the financial markets. China’s problems revolve around disorderly debt restructurings in their property sector to escalating cross-border trade and technology tension which their recent common prosperity initiative makes more critical to be resolved.
Cloudy With a Chance of Sun by LESLIE CALHOUN President and CEO Halfway through the year and the US economy continues to rally despite a surge in the Delta variant of Covid-19. Business confidence is strong, financial …
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Reopening Surge and Supply Chain Disruption Driven Inflation by LESLIE CALHOUN President and CEO The pandemic year of 2020 quickly attracted bargain hunters to Wall Street but left Main Street struggling with lockdowns, lost jobs, and the …
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2021. Navigating from Pandemic Headwinds to Vaccine Tailwinds by LESLIE CALHOUN President and CEO In normal times, the dawn of a new year often brings an optimistic feeling because we naturally want to delineate the eras and …
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US & World Economy by LESLIE CALHOUN President and CEO As we come upon the 2020 Presidential election, I have a feeling it will be as memorable as the rest of the year has turned out to …
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US & World Economy by LESLIE CALHOUN President and CEO It’s no doubt that the first months of 2020 has been the most surreal months we have experienced. I’m sure many of you have similar feelings of …
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US & World Economy by LESLIE CALHOUN President and CEO Over the past 8+ weeks, we’ve witnessed the fastest stock market sell-off in stocks in our country’s history, with a 34% sell-off in the S&P 500 from …
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US & World Economy by LESLIE CALHOUN President and CEO A New Year Resolution Both the stock and bond markets had one of the best years on record in 2019, and this most recent decade was the …
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US & World Economy by LESLIE CALHOUN President and CEO One for the record books! We have now broken all bull market duration records and have reached all-time highs in our US stock market. Our economic expansion …
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