Founding Principal & Managing Director, Craig Robson
For many of us, the beginning of the pandemic seems like a lifetime ago. As we move forward, we continue to see signs of economic optimism and recovery. The Wall Street Journal recently polled business and academic economists and they expect better growth forecasts for gross domestic product in Q3 than originally anticipated (23.9% compared with 18.3%).1 They also expect unemployment to tick down to 8.1% by December, compared to 9% in the earlier survey.2 While these forecasts are just one set of professional opinions within many evolving data points, there is continued optimism in this recovery which aligns with the market’s strong recovery since the March precipitous decline.
The Federal Reserve made a big announcement recently that might have gone unnoticed. The FED announced it is changing its policy to an “average inflation target” of 2%. This will allow for the economy to remain “hot” for a longer period before they take action (i.e. potentially raise rates).3 What impact will this have? I believe it’s important to note, the economy has rarely achieved or exceeded the Fed’s 2% target over the past decade. So, there doesn’t appear to be a large risk of hyperinflation in the foreseeable future and if that’s the case what does this mean for investing? If we let history be our guide, when inflation has been low to moderate, riskier assets like, equities, high yield bonds, bank loans, etc. have performed best. Conversely, hard assets such as commodities perform better in higher inflation environments, like what we experienced from 1960-1990.4
One change I have made recently, is choosing to travel for business and pleasure, which included my first flight since mid-February. Overall, I was very impressed with how individuals, corporations, and public entities (airports, parks, beaches, etc.) conducted themselves specific to the COVID-19 environment. While I still plan to be cautious, I will increase my travel frequency as my recent experiences provide me a greater level of confidence. I am curious, if others have similar or different travel experiences, since August?
Last week we commemorated the 19th year since the terrorist attacks on our country. I suspect everyone who was alive and old enough to understand that fateful day, will never forget where they were when they witnessed the events of 9/11. From a fragility perspective I would like to reference a quote from Sandy Dahl, wife of Flight 93 pilot Jason Dahl, “If we learn nothing else from this tragedy, we learn that life is short and there is no time for hate.”
- Craig Robson
- Founding Principal and Managing Director