Strategy Note /

Confusion By Extrapolation

  • While investors price in multiple unpleasant scenarios, range trading equities suggest the outcome remains in doubt

  • Various examples of dissonance btwn economic data, asset prices & future expectations suggest extrapolation isnt advised

  • We expect our inflation fever break thesis to play out shortly, creating potential for cross asset price reversals

Jay Pelosky
Jay Pelosky

TPW Founder & Global Strategist

TPW Advisory
1 May 2022
Published byTPW Advisory

Investors have suffered through a very tough month with few places to hide as even recent winners like commodities get hit. 


Those, like us here at TPW Advisory, who have been constructive, are battered & bruised, left to question their POV.


Yet while investors price in multiple unpleasant scenarios, the outcome remains in doubt as range trading equities indicate uncertainty as to which way the economy will go. This makes perfect sense given the rolling waves of uncertainty generated by our 3 Cs: Covid, Climate & Conflict.


Multiple examples of dissonance between economic data, asset price action and future expectations across asset and economies suggest extrapolation at speed is not advised.


We expect our inflation fever break thesis to play out across both the US and EU in coming months, creating the potential for sudden price reversals across assets. Earnings, low real yields, stable credit among others keeps us constructive on risk assets.