{"id":1227,"date":"2023-11-08T21:25:58","date_gmt":"2023-11-08T21:25:58","guid":{"rendered":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/?p=1227"},"modified":"2025-02-17T22:21:29","modified_gmt":"2025-02-17T22:21:29","slug":"september-market-insights-the-feds-high-wire-act","status":"publish","type":"post","link":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/2023\/11\/08\/september-market-insights-the-feds-high-wire-act\/","title":{"rendered":"Market Insights by James Thorne: Riding The Bull In The Midst Of Chaos"},"content":{"rendered":"\t\t
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Investing Strategies For A New Era Of Growth And Innovation<\/b><\/h2>\n
<\/div>\n\u201cI never seen you looking so bad, my funky one.\u201d \u2013 Steely Dan<\/em>\n\nIn the investment world, volatility and uncertainty often reign, evoking a sense of unease. Remembering the call for 3000 on the S&P 500 Index in late 2022, the recent correction at 4600 might seem unnerving. Yet, like the hopeful message in Steely Dan\u2019s song Any Major Dude Will Tell You, we should maintain our resilience, knowing that things will eventually fall together again.\n\nHistory Repeating?<\/span>\n\nUsing data, historical analysis, and objective evaluation, we can navigate these tumultuous financial waters. Our conclusion: inflation is closer to the central bankers\u2019 target than consensus believes. We are headed back to secular stagnation, expecting a decline in interest rates, and foresee a secular bull market driven by innovation into the end of the decade, echoing the 1990s.\n\nDuring the \u201890s, while Japan\u2019s economic rise seemed to threaten the American dream, interest rates were heading to the zero-bound and seeds of technological innovation were being planted. The transformative power of the digital economy and China\u2019s urbanization were unpredictable, yet as Mark Twain is reputed to have said, \u201cHistory doesn\u2019t repeat itself, but it often rhymes.\u201d\n\nToday, we grapple with the aftermath of a pandemic, the Great Financial Crisis, the rise of China, and the digital revolution. All of which leads us to ask whether we are facing a resurgence of inflation akin to early \u201890s predictions, or are we bound to return to secular stagnation and deflation? We anticipate interest in government bonds will rise. A closer look at the data suggests a significant rate decline awaits us in 2024, and the anticipated rapid rate increases could be a significant policy error in our globally interconnected financial system.\n\nA \u201cTurning\u201d on Interest Rates?<\/span>\n\nFinancial eyes are on 2024, expecting a large increase in U.S. Treasury auction sizes. This development could impact other fixed-income investments as the expanding Treasury market might pull dollars away from similar assets. Investors must remain alert to these dynamics.\n\nProminent economists argue that low interest rates mean government debt isn\u2019t concerning. However, with real interest rates now exceeding most long-term economic growth estimates, the sustainability of high debt levels could become a pressing issue.\n\nMy base case is that we are returning to secular stagnation, with low interest rates and inadequate demand persisting. The current rate spike seems temporary, reminding me of Japan\u2019s battle with deflation.\n\nBefore the pandemic, real interest rates declined due to slowing economic growth and reduced investment demand. With population growth still low, it\u2019s logical to ask why interest rates wouldn\u2019t return to pre-pandemic levels once inflation is under control. The Federal Reserve Bank of New York suggests that the real short-term interest rate, when the economy is strong and inflation stable, is about the same as before the pandemic. As inflation decreases, real rates will continue to rise. This, combined with high debt levels, makes a credit crunch seem imminent. The economy\u2019s resilience in the face of U.S. Federal Reserve rate hikes could indicate a rise in the real short-term interest rate, or it could be temporary due to lags in monetary policy effects.\n\nWe are living in a time of intense chaos, often referred to as the \u201cFourth Turning.\u201d[1] We now know inflation was transitory and, burdened with excessive debt, our only solution is to ignite growth, akin to the approach taken between 1945 to 1970. It\u2019s a time for investment-led growth bolstered by fiscal policy. We are on the brink of a deflationary shift, where artificial intelligence (AI) and blockchain will push organizations to innovate.\n\nWhat Does This Mean for Investors?<\/span>\n\nIn this low-growth environment, progress will outshine value. As Wall Street embraces blockchain and Bitcoin, we anticipate a resurgence in earnings. AI will be a key driver of productivity. Investment in secular growth themes will be crucial for equity market success, implying a stock picker\u2019s market. Like the early \u201890s, we foresee a secular bull market lasting until the decade\u2019s end.\n\nHowever, with fewer stocks available today\u2014half as many as in 1995\u2014valuation based on history may seem expensive. Portfolios should lean towards large, secular growth companies. Pay attention to what millennials want, just as we did with boomers in the \u201890s. This time is not different!\n\nAs for stocks, I prefer growth over value and the U.S. over Canada. In 2024 we are forecasting a rate of return for the S&P 500 of 10 per cent. Meanwhile, we will experience a halving cycle in Bitcoin, which will reduce supply. Coupled with the eventual approval of Bitcoin ETFs in the U.S., investors should expect crypto assets and the tokenization of real assets to become an accepted investment theme.\n\nAs for bonds, the Fed\u2019s hiking days are over and interest rates have peaked. By spring 2024, there may be many who missed the boat and are left with only \u201ccould have, should have, would have\u201d regrets. If July marked the last Fed hike, history suggests rate cuts by March 2024. While markets can indeed remain irrational longer than one can remain solvent, as British economist and philosopher Lord John Maynard Keynes stated, it\u2019s also true that fundamentals eventually matter. Sir John Templeton, American-British investor and banker once warned, \u201cThe four most dangerous words in investing are \u2018this time it\u2019s different\u2019.\u201d\n\nOr in the words of Steely Dan, \u201cWhen the demon is at your door. In the morning it won\u2019t be there no more. Any major dude will tell you.\u201d\n\n[1] William Strauss and Neil Howe\u2019s book The Fourth Turning, refers to an 80-year cycle of renewal, stabilization, decline and crisis in society.\n

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The information contained herein has been provided for information purposes only. Graphs, charts and other numbers are used for illustrative purposes only and do not reflect future values or future performance of any investment. The information has been provided by J. Hirasawa & Associates and is drawn from sources believed to be reliable.\nThe information does not provide financial, legal, tax or investment advice. Particular investment, tax, or trading strategies should be evaluated relative to each individual\u2019s objectives and risk tolerance. This does not constitute a recommendation or solicitation to buy or sell securities of any kind. Market conditions may change which may impact the information contained in this document. Wellington-Altus Private Wealth Inc. (WAPW) and the authors do not guarantee the accuracy or completeness of the information contained herein, nor does WAPW, nor the authors, assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Before acting on any of the above, please contact me for individual financial advice based on your personal circumstances. WAPW is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.\n\u00a9\ufe0f 2023, Wellington-Altus Private Wealth Inc. ALL RIGHTS RESERVED. NO USE OR REPRODUCTION WITHOUT PERMISSION<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"

Investing Strategies For A New Era Of Growth And Innovation \u201cI never seen you looking so bad, my funky one.\u201d \u2013 Steely Dan In the investment world, volatility and uncertainty often reign, evoking a sense of unease. Remembering the call for 3000 on the S&P 500 Index in late 2022, the recent correction at 4600 […]<\/p>\n","protected":false},"author":68,"featured_media":3099,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_oasis_is_in_workflow":0,"_oasis_original":0,"_oasis_task_priority":"","_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[1],"tags":[153,146,50,42,43,89],"class_list":["post-1227","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-market-insights","tag-2023-trends","tag-economic-insights","tag-financial-market","tag-global-economy","tag-inflation","tag-market-insights"],"_links":{"self":[{"href":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/wp-json\/wp\/v2\/posts\/1227","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/wp-json\/wp\/v2\/users\/68"}],"replies":[{"embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/wp-json\/wp\/v2\/comments?post=1227"}],"version-history":[{"count":4,"href":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/wp-json\/wp\/v2\/posts\/1227\/revisions"}],"predecessor-version":[{"id":3159,"href":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/wp-json\/wp\/v2\/posts\/1227\/revisions\/3159"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/wp-json\/wp\/v2\/media\/3099"}],"wp:attachment":[{"href":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/wp-json\/wp\/v2\/media?parent=1227"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/wp-json\/wp\/v2\/categories?post=1227"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/wp-json\/wp\/v2\/tags?post=1227"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}