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CONSENSUS
Hiking interest rates is now officially as trendy as it has ever been for central banks around the globe. With a few interesting exceptions, usually involving a dictatorship, virtually every country is in the midst of a rate hiking cycle in a bid to control inflation.
Despite the chart, some good news appears to be finding its way into the markets. There are now broad expectations of slowing rate hikes and ultimately cuts in 2023. The data we track suggests inflation has begun to abate, and though we do believe it will be persistently high for some time, the peak is likely in.
Howard Marks: I Beg to Differ
We don’t include every memo from Howard Marks in these musings, but he does have an impressively high hit rate. This piece focuses mainly on why you should be different than the herd in investing. Whether your target is return or reduced volatility, doing what others are doing and chasing recent trends will lead to average results by definition.
One important point we have been discussing recently is valuation. Yes, there is a heightened recession risk at the moment, but valuations in some portions of the market are very much reflecting, or even over-extrapolating, that risk. Perhaps a reason to differ from consensus.
The possibility – or even the fact – that a negative event lies ahead isn’t in itself a reason to reduce risk; investors should only do so if the event lies ahead and it isn’t appropriately reflected in asset prices.
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Harsh Truths That Will Change Your Life
This is worthy of some time and thought.
My friend asked how often I saw them and how old my parents were...
I replied that I saw them about once per year, and that they were in their mid-60s. He looked me square in the face and plainly said:
"Ok, so you'll see them 15 more times in your life."
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The Remote Work Revolution
There is finally some stability in data around remote work in a post pandemic world. We will no doubt see some incremental shifts, but there seems to be a consensus leaning towards some version of hybrid in most industries, with more remote work in technology and finance roles. Interesting reading.
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Complacency Gives Way to Uncertainty
A summary of Byron Wein’s annual Benchmark Lunches, which feature major investors around the world. The key insight for us was the apparent lack of agreement on many key topics across real estate, markets, and even the pandemic. All the more reason to remain flexible in our views.
In last year's essay, the consensus was one of complacency. This year, it's hard to say that there’s a consensus on much of anything at all. As complacency has given way to doubt, let’s hope the next stage is some clarity.
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