Good morning. Friday was another bad day for both stocks and bonds, after the jobs report suggested the Fed had more work to do to bring inflation down. Overreaction to single data points will be the norm until all the little bits of information line up to send a single message — that the Fed has done enough. A few reflections on investing in such a world below. Email me: [email protected].
What to own while waiting for inflation to fallI was struck by this quote, from a Wall Street Journal article on Sunday:
“Earnings are important,” said Alex Chaloff, co-head of investment strategies at Bernstein Private Wealth Management. “But as far as earnings being the beacon for the future of the market? No, it’s less important this quarter. Inflation is the number one, two and three most important data point.”
It is remarkable to hear a strategist — a person who is paid to have clever, differentiated thoughts about the market — say, basically, “Screw it, it’s all about the Fed, earnings don’t matter, nothing matters, life is absurd.” But Mr Chaloff’s Beckettian view of the market has the advantage of being true. It is not all that gross an exaggeration to say that there is only one trade right now. If you believe inflation is near a point where the Fed can slow and then stop its rate hikes, seek risk; if you believe inflation is not near this point, flee risk.