It Will Get Worse Before It Gets Better
We wrote months ago that peak inflation is not in sight. We expect prices to continue to rise for the month of June across food, shelter and energy above today’s 8.6% CPI print. We see the impact of price inflation on GDP (Atlanta Fed’s “GDPNow” estimate is 0.9% for Q2), and would not be surprised if Q2 was the second consecutive negative Real GDP print when the final Q2 productivity figures roll in – which would technically be a recession. Our multi-year view is that inflation will persist in the 4-5% range over the next several years and 3-4% over the next few years with Real GDP averaging zero percent. The Fed does not have the tools to take the CPI back to 2% and our enormous $30 Trillion public debt load combined with high corporate debt (that needs to be rolled over), is a wet blanket on economic growth.
Equities will be a tough place to make a living. Best to look for under-followed stocks led by proven leaders, ideally CEO and CFO teams that have led companies through recessions and through periods where credit was not so darn cheap (pre-2009). Institutional investors should reach out to us at email@example.com to learn more about how we may assist with providing investment due diligence on public company management teams.