Strategy Note /
Global

Title Fight

  • Investing in 2022 - whether in public or private markets - has felt like a fight. Long, drawn out and painful.

  • The title fight is underway - the inflation champ and the earnings challenger are in the ring and the champ is ahead.

  • The champ looks unbeatable & the odds say the same; but what if June's 9% CPI print was the knockout punch that failed?

Jay Pelosky
Jay Pelosky

TPW Founder & Global Strategist

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TPW Advisory
15 July 2022
Published byTPW Advisory

Well, it certainly feels like one has been in a fight, what with both stock & bond investors facing one of the worst starts to a year in a century – that’s not easy to do. Coupled with the “Market Speed  backdrop we have written about at length and the confusion, apathy, illiquidity & whip saw price action across the financial asset space it’s been a lot to handle for both public & private markets alike (note Klarna’s near 90% down round fund raise).

 

As in a title fight there is the undercard and the prelims before one gets to the big match up. One can envision the pre lims being such melodramas as Italian political dysfunction, UK leadership transition, Pres. Biden coming back empty handed from Saudi (oil market barely blinks) while at home Sen. Manchin deep sixes his domestic agenda.

 

As one moves up the card one gets to the Russia – Ukraine conflict, Germany’s dash for gas, China’s post Covid recovery and the global economic fight between slowing US and EU economies and China’s economic acceleration out of its lockdowns.

 

Then comes the title fight. The match up between what has seemed like an unstoppable champ – rising inflation & the Central Bank response (mainly the Fed to this point among the majors) and the havoc it is creating among risk assets vs the upstart Earnings challenger, who counters that while a shallow recession is possible, anything deeper is unlikely and earnings are likely to be fine given a high nominal growth rate.