“Old Glory”
In an era where many are turning their backs away from “Old Glory” we think it’s highly important to celebrate the union our founding fathers created on Independence Day. Of course, this freedom of expression that so disheartens some, if not many, is part of what makes this country so great. By contrast, in Hong Kong critics are jailed and newspapers are shut down that disagree with the Chinese Communist Party. Worse, if you are an Uighur Muslim in China, you risk being detained with one million of your friends in reeducation camps as an adherence to national ideology. Hopefully, we can agree the promise of liberty and justice established many years ago, while not without blemishes, has provided a pretty high standard of performance for many years. In fact, one might say the pursuit of happiness within our constitutional republic has proven very prosperous for its constituents and the world. We realize some may disagree with this statement, and to that, we would say that the ability to disagree with this point, and not be locked up, may actually prove our point.
Political rabbit holes aside, we think it’s important to bring up nationalism because it relates to inflation, a fear on many people’s mind lately. With the global supply chain interrupted and populism growing it seems normal to expect some inflation. The question on many minds is how transitory is this inflation? Many hearken back to the 1970’s as a frame of reference and while we see the parallels, history doesn’t always follow the same pattern. Some argue the 1940’s are a better comparison, and if so, it is important to note equities did quite well in that era. The seventies, by comparison, were not a great period for equities, but nothing else did much better except gold and oil that increased more than 19%.
Thus, against the backdrop of rising debt and decreasing globalism, one certainly understands the question about inflation strategy and positioning. Conversely, one could say we have had those questions for a while now and inflation hasn’t impacted the market in a significant way. From our perspective, we would argue we have been preparing for inflation for years by keeping duration low on our fixed income, minimizing exposure to long duration assets like growth stocks and making sure we had exposure to cheap sectors of the market like financials, energy, and small caps that typically perform well in a cyclical recovery. In addition, we have recently added commodities to portfolios to help protect against inflation risk.
Is there more that we could do? Possibly. However, to significantly position beyond what we have already implemented for possible increased inflationary pressures would imply we have a crystal ball that clearly showed a material dose of inflation was here to stay. Unfortunately, we do not own a crystal ball and indicators are never that clear. Additionally, if you find someone who says they know for certain how bad inflation is going to be in the near term, we think you will find they are one of those people who are often wrong but never in doubt. Strangely, these people always find an audience no matter their track record. We find markets are more complex than most figureheads can encapsulate in a brief sound bite.
Putting the inflation talk to bed, as we feel we have proactively positioned as well as we can at this point, we move onto the rest of the market. Many have asked us about current levels of the market. To this, we say as long as liquidity flows via central banks and earnings trend higher without significant inflation, we can continue higher. There are pockets of the market that appear stretched but there are other areas of the market that could run for a good while longer. Active management has outperformed since November of 2020 and may very well continue in a market like this. Of course, we will continue to treat this market as a complex adaptive system that requires disciplined, long-term risk adjusted strategies. To govern assets in any other way would be a disservice to the trust you have placed in us, a trust we treat with great honor and dignity.
Sort of like the experiment that started two hundred and forty-five years ago when our government was derived from the consent of the governed. We, too, find a symbiotic strength and stability in the management of your wealth with your agreement. To paraphrase the Federalist papers, we are nourished in your freedom. We will continue to monitor markets in a careful and deliberate manner because we truly respect the consent you have given us and wish to protect our clients with every tactic and tool available. It may sound corny, but we will never turn our back on you, and we want to grow old and glorious with you. Please call with any questions.
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Creative Financial Group (“CFG”) is a division of Synovus Securities, Inc (“SSI”), member FINRA/SIPC. Prior to January 1, 2011, CFG was a separate registered investment adviser affiliate of SSI. Investment products and services are not FDIC insured, are not deposits of or other obligations of Synovus Bank, are not guaranteed by Synovus Bank and involve investment risk, including possible loss of principal amount invested. Synovus Securities, Inc. is a subsidiary of Synovus Financial Corp and an affiliate of Synovus Bank. You can obtain more information about Synovus Securities, Inc. and its Registered Representatives by accessing BrokerCheck