2021_12_20 — THEME: Different Directions — Central Banks, Glaciers, Spiders, and L.A. is #3
December 20, 2021
Michael’s CIO (Check It Out) Report on the week just past — events, sarcasm, and global macro reflections
THEME: Different directions — central banks, glaciers, spiders, and L.A. is #3
- Up bank, down bank🌍 Hungary’s central bank hiked rates for the 5th straight week; Turkey reduced interest rates a full 1% to spur its economy; Russia’s central bank increased rates 1%; U.S. Federal Reserve accelerated the taper and hinted at higher rates in the future, but left rates unchanged for now; Bank of England raised rates 0.15% to stem inflation; European Central Bank left rates unchanged but increased quantitative easing (QE) as economic growth remains iffy; Norway raised 0.25%; China lowered its one-year loan prime rate a tiny 0.05%; Colombia’s and Mexico’s central banks hiked 0.5%; and Japan, Switzerland, Philippines, Taiwan, and Indonesia were unchanged — Global growth is inconsistent across continents and countries, hence the varied central bank reactions🧐
- Right, Said Fed: U.S. Federal Reserve officials shift monetary policy to the right (i.e., more conservative/hawkish) and hint that they will begin to fight inflation by ending their asset-buying program quickly (i.e., in early 2022) and by possibly raising interest rates — The Fed is merely slowing accommodation from immense to modest, but when interest rate pivots like this happen, reporters tend to assume a continuous projection upwards in Fed rates; however, since 1980, practically every interest rate rise has topped out at a lower peak rate than previous attempts: 20% followed by 18%, then 15%, 11.75%, 9.75%, 6%, 6.5% (an aberration), 5.25%, and 2.5% in 2019 — 🤨There is a good chance this pattern of lower peak rates continues! [see next bullet]
- Max Headroom👱🏼♂️ Mounting debt and deficits mean the Fed has very little headroom to raise rates, or else federal debt interest payments become an unreasonable burden
- Watchful: Federal Reserve policy normalization will be one of the dominant forces shaping markets in 2022. But policy reacts to the environment and inflation — Economic growth is likely to be strong in 2022, but investors will continuously look for what’s beyond the bend — Longer dated credit, real estate, and venture funds can smooth return volatility
- Labor: Social growth could surprise to the upside, underpinned by a robust labor market that could take unemployment rates to startlingly low levels — 👷🏽♀️Supply of labor will determine this labor market evolution, not demand
- “Journey”: The new buzzword describes any business goal, even mundane ones😊Pandemic, inflation, supply and labor shortages: it’s been a journey
- #3: Los Angeles ranks third in StartupBlink’s list of best U.S. cities for startups, behind SF and NY, but ahead of Boston, Seattle, Chicago, and Austin — If you desire exposure to startup investments/venture capital, we see a lot of opportunities and are in touch with effective funds🧬💻🧪
- TPG, the private equity shop, has filed to go public with a stock offering — the irony of private equity going public is not lost
- Time Thwaites for no one🧊 Antarctica’s Florida sized Thwaites Glacier will, according to scientists, slide into the ocean in the next few years and raise sea-level by at least a foot — glaciers down, oceans up
- Spiders🕸 U.K. pest control company Rentokill will purchase Tennessee based Terminix for $6.7B
- No Way!: Coincidentally, Spider-Man: No Way Home grossed the third highest movie opening weekend ever, $253MM domestically plus another $334MM from 60 overseas markets (and that’s without a China release)
- Next Steps: We remain hyper-focused on asset allocation, the use of best-in-breed efficient and effective investments, and finding outperformance from tax-saving strategies; and we keep an ever present eye not only on equities and bonds, but also opportunities to invest in private real estate, private credit, venture capital, growth equity, DeFi, and hedge funds — please reach out
- Last graph🏡 We know that an uptrend in U.S. home prices has accelerated over the last year, but seeing is believing
Happy holidays and best wishes for the week ahead😃,
Michael
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Michael Ashley Schulman, CFA
Partner / Chief Investment Officer
“We deliver bespoke investment solutions, innovations, and unique perspectives to you and your family.”
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Disclosure: The opinions expressed are those of Running Point Capital Advisors, LLC (Running Point) and are subject to change without notice. The opinions referenced are as of the date of publication, may be modified due to changes in the market or economic conditions, and may not necessarily come to pass. Forward-looking statements cannot be guaranteed. Running Point is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Running Point’s investment advisory services and fees can be found in its Form ADV Part 2, which is available upon request. RP-21–50
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