As a quick follow up to our quarterly newsletter, I thought I would take the opportunity to update you on our investment thoughts in light of what appears to be a regime change in monetary policy expectations. To recap, we said that:
- We expected inflation to become more of a concern than it has been in the recent past given the coordinated global growth we have seen.
- Given the “goldilocks scenario” of ideal investment conditions, investors were bound to be surprised by a change in inflation expectations and potentially monetary policy.
- All assets are priced from US short-term T-bills (we call this the “risk-free” rate). If these rates move up rapidly, asset prices may come under pressure. This pressure is further magnified by the fact that valuations are extremely high.