Category Archives: Inflation

Did they mean “Transit”-ory ?

Market Memo

March 2023 – By Kyle Rohrwasser

An eternity ago in 2021, the Federal Reserve kept reiterating that inflation was “transitory”. We, like many others, were skeptical because of the amount of money printed and moved into the financial system. This collided with a wildly efficient shipping industry that had stopped dead in its tracks (pun unintended) while demand for products continued to grow. But how do we get those products at such low and reasonable prices? Well, many of you may be familiar with China and US trading but you don’t understand how truly efficient the ships and logistics have gotten in the past 30 years.

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It’s Alive! – Is The 60-40 Portfolio Model Back?

Market Memo

October 2022 – By Kyle Rohrwasser

Just in time for Halloween, the 60-40 portfolio model has risen from the grave in just a few short months.  A 60/40 portfolio has long been an industry standard, representing 60% equities with a ballast of 40% fixed income.  Between October of 2018 and August 2020, we saw 10-year treasury rates drastically move down from 3.23% to 0.55%. That created a paradigm shift towards equity over fixed income. Fixed income prices move in the opposite direction of their yields.  As yields drop, prices increase, and vice versa.  This inverse relationship is known as Interest Rate Risk and is measured by a data point known as duration.  During the summer of 2020, with fixed income yields pressed lower, adding interest rate risk almost guaranteed losses in the event the Federal Reserve increased interest rates.  This had some analysts claiming the 60/40 portfolio was dead, as the ‘safe’ portion of the portfolio (fixed income) carried a high degree of interest rate risk while simultaneously paying very little yield.  This dynamic caused many investors to allocate even more to equities to compensate for the poor fundamentals within the fixed income market. 

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Better Than Most

Market Memo

September 2022 – By Kyle Rohrwasser

“I continue to believe that the American people have a love-hate relationship with inflation. They hate inflation but love everything that causes it.” – William E. Simon

The most recent example of the quote above was the liquidity provided by the Federal Reserve during the COVID pandemic through stimulus and PPP loans. There has also been a slow building of a swelling governmental budget and accommodative banking practices with the use of quantitative easing (increasing the money supply). This caused increased stock prices, home prices, more economic activity, in turn more jobs, etc.… all things Americans love! Now we face the reverse as the Fed will be restrictive for the foreseeable future.

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I Have Heard That One Before

Market Memo

July 2022 – By Kyle Rohrwasser

In last month’s memo, I quoted Jerome Powell; he stated in May that the Federal Reserve (Fed) would not raise the federal funds rate higher than 50 basis points in June, but they moved it to 75 basis points after a higher-than-expected inflation number. This time around a 75-basis point rate hike is locked in but a 100 (1%) basis point move is still on the table.

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