The end is nigh. The end of the Federal Reserve’s rate hiking cycle, that is. But it is not here yet. We can still expect additional rate hikes, at least this year, which will have their impact on the markets. Meanwhile, the “long and variable lags” in monetary policy mean that the full impact on the economy of the most aggressive rate of interest rate hikes ever has yet to be felt. The economy here is moving inexorably towards recession, as it is in Europe, the U.K. and elsewhere. Though the end is not here yet, it is likely that the Fed will halt its rate hiking before inflation hits its magic 2% target as the economy enters recession. The result is stagflation, an environment when we can expect gold, other commodities, and emerging market equities to perform well, while developed market stocks and bonds do badly. We are positioned for that eventuality.

Finish reading here: Portfolio Review 2Q2023