We do expect this inflation spike to fade as bottlenecks are resolved. However, how long is transitory? This elevated inflationary period could last longer than the bond market currently expects. Yields have remain flat, whistling past two high inflationary readings. What happens if we have a 3rd, 4th, 8th month of elevated inflation? We would bet yields will begin to rise in response.

The story for each commodity is rather nuanced and idiosyncratic. Copper is one example of a metal that could be a more durable
bull market, but the rationale behind the popularity of Dr. Copper has nothing to do with lumber prices or the price of tea in China.
No doubt it’s been a good time for commodity exposure and a healthy home country bias, but we’d question characterizing it as a
supercycle to endure for years to come. The critical aspect is that the demand surprise may not be as enduring as some expect and
we expect the supply issues to resolve over the course of the year. We still like commodity exposure given the potent structural
backdrop for real assets, but more in a tactical sense.

Market opiners, ourselves included, have been commenting about rising inflation for a few quarters now and it’s finally started to show up in the consumer price data. Pretty much every price indicator is showing rising prices. This is evident in year-over-year measurements, which are exacerbated by depressed prices a year ago, and if you just look at price changes over the past few months. Core U.S. CPI is up about 1.4% over the past 3-months—that would be 5% annualized if the pace persisted. Year-over-year producer prices are up (+4.1% ex food & energy), with import prices at +11% at exports at +14%. If you were waiting to ‘see the whites of their eyes’ (for inflation, that is), this may be the time.

With the Xth wave of the pandemic ongoing and a good portion of the world’s population still stuck at home, you would not be alone in wondering why the economy and equity markets are doing so well.

The ‘Biden Bust’ that Trump warned us about has turned into the ‘Biden Boom’. April 28th marked President Biden’s 100th day in
office. In that time, the S&P 500 is up 8.6%. That mark’s the strongest market performance during a new president’s first 100 days
since JFK in 1961. Higher taxes you say? The markets do not seem to care.

Sometimes we can get a little overboard with our use of market personification. Though abstract and ethereal, the market can be thought of as a projection of human emotion, though it is obviously incapable of human behaviour. Keeping a pulse on the market’s mood is a rather elusive, but important part of understanding market risk or opportunity especially when it is at extreme levels.

The market moves in cycles with the two key phases being a bull market (good times) and a bear market (bad times). Determining at which point a bull market begins or ends is never evident at the key turning points. It sometimes takes many quarters or even years before all are convinced ‘that was the bottom’ or ‘that was the top’. Which brings us to the big question of this Ethos: did a new bull market start in late March of 2020 or are we in the same bull market cycle that started way back in March of 2009?

Over the past number of years there has been a deluge of new data sources. Investors no longer have to wait for company earnings or government statistics to get a sense as to what the economy is doing. This higher frequency data can help in providing an  informational edge and generating portfolio insights. Whether or not that edge is still there when it’s become available to your average Joe with a Bloomberg, is another story. Regardless, we do find it useful to help track economic activity, identify trends and pattern and gauge market dislocations.

For the first half of the quarter, market participants facilitated a run of risk-on activity. The final month, however, was characterized by a pumping of the brakes on high-flying names. While the majority of markets still performed well, there has undoubtedly been a
continued divergence in equities between growth & value – more on that later.

Perhaps one of the more pressing questions for asset allocators and portfolio managers is whether or not the recent resurgence in value stocks is a true turning point or just a blip in the continued dominance of growth. It’s rare to see one style dominate for so long like growth has, with such a huge acceleration in the trend in 2020. Was 2020 a blow off top for Growth vs Value? Or has the market truly changed?

The market gyrations of holding 100% equity is simply too great for most and combining some bonds reduced the overall
portfolio volatility. This diversification, of adding various asset classes, is at the heart of modern portfolio theory and how most portfolios have been constructed.

Those four words are arguably responsible for more loss of capital than any other phrase. While certainly these can be
“dangerous” words when used to cajole the unsuspecting, markets are in fact always changing. They change because the behaviour of market participants changes. Whether the players are central bankers, active portfolio managers or a group of investors influenced by a crowd-sourcing platform, their actions constantly change and that alters how the markets function.