Views From the Top (June 2022) | Normalization

Deflating the Everything Bubble

Bayshore’s Chief Investment Officer shares his thoughts on current events and topics.

In this issue of Views From the Top, we provide an overview on what’s driving the current market
correction and how we expect matters to unfold.

Key take-aways: 

• The last decade was marked by strong returns across risk assets, fueled by a combination of  falling interest rates and an absence of inflationary pressures. 
• The US government’s significantly larger and consumer-directed economic stimulus policy in  2020 and 2021, in combination with a variety of supply-side problems, has inevitably caused the  current high inflation. 
• The Federal Reserve is in the midst of an aggressive maneuver to tighten financial conditions in  its attempts to curb inflation, while simultaneously trying to avoid a recession. 
• Inflation readings are likely to be slow to adjust, and we believe that structural factors, such as  deglobalization and decarbonization, will keep it substantially above 2% over the next several  years. 
• We anticipate that the Fed will soon scale back their hawkish tone and action in order to  minimize stress in the equity and bond markets.
• The best investments are made in the 12-18 months around peak market stress, and we are  gearing up for a busy time to take advantage of dislocations in the market.