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Later in this reading, we will cover the effects of Central Banking in the U.S. below.

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Economic Insights:

• Stagflation in the economy*

• Effects of Central Banking

Investors Lab:

• The Evolution of ESG Investing and Why it’s Getting Popular

• “Stay defensive with lots of cash in your portfolio.” Says T. Rowe

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^{MACRO-ECONOMIC INSIGHTS}

Stagflation in the economy

This scenario is considered unusual because inflation and unemployment typically have an inverse relationship in economic models, known as the Phillips curve. Stagflation challenges the traditional economic theories that suggest low unemployment is associated with higher inflation and vice versa.

Why is this an issue?

Our thinking at Simplify Wall Street is stagflation will pose a dilemma for policymakers because the conventional tools used to address high unemployment (stimulative fiscal or monetary policies) may worsen inflation, and measures to control inflation (contractionary policies) may exacerbate unemployment.

It is a complex economic phenomenon that requires careful consideration of multiple factors and a nuanced approach to policy decisions.

WE Family Offices CEO Covers gives her thoughts on the market & economy.

Effects of Central Banking

What is a central bank?

Back to the basics. All you need to know about Central Banks!

The video accompanying the post suggests that the central banking policies, particularly monetary inflation (excessive money printing), eroded the purchasing power of the currency.

As a result, the woman featured in the video is facing financial hardships, finding it challenging to afford essential expenses despite earning what would be considered "good money." The implication is that the value of her earnings was undermined by the impact of central banking practices, making it difficult for her to maintain her standard of living and cover basic costs.

Investors Lab

The Evolution of ESG Investing and Why it’s Getting Popular

This guy explains it in 60 seconds:

Beyond Profits: ESG investing recognizes the importance of more than just financial performance. Institutional investors leverage ESG strategies to support positive change while seeking competitive returns.

Risk Mitigation: ESG factors play a crucial role in highlighting risks that might be overlooked in traditional analyses. Issues like climate change present significant long-term risks that institutions are now taking into account.

Our thoughts:

It sounds good, right? Investing in a company that has a high ESG value can be cool, but if you are a performance based investor then you may not take helping climate change, or changing political views, into your investment decisions.

Bottom line is you may love it if it makes money for you or your clients, but a companies earnings power comes first for most investors. Investors want to change the world, but they always want to retire early, pass down wealth, and bring in income.

Essentially in our eyes it can be a way to make poor performing companies look like great investments. If you can have impact and high performance, great, but performance for our clients will continue to come first.

Would love to hear your thoughts!

“Stay defensive with lots of cash in your portfolio.” Says T. Rowe

You can read the full article HERE, but there were 2 things that stood out.

1. Be especially careful now with companies that have a lot of debt: Companies did a great job of refinancing their debt at near-zero interest rates in 2020 and 2021. But debt is not forever. 

   • It comes due and needs to be rolled over. That'll be the case soon for a lot of the cheap debt arranged two to three years go. "In 2024 and 2025 the refinance risk comes due," cautions Steve Boothe, the head of global investment grade debt at T. Rowe Price. "A lot of that low coupon debt from 2020 and 2021 will need to be refinanced in 2024 and 2025."

2. Uruçi also thinks it is too soon to declare victory over inflation. This means Fed Chair Jerome Powell won't be going soft on interest rates any time soon, adds T. Rowe Price capital markets strategist Tim Murray.

   • "Recovery is still in doubt until inflation is under control and we get the signal from the Fed that it will be cutting," Murray says. "Powell keeps saying, 'We are not cutting any time soon.'" The upshot, concludes Murray: Recovery will remain in doubt in 2024.

These are comments we agree with. Sometimes the general public can be very optimistic and as a seasoned investor and trader, SWS understands that long term investments deserve optimism, short term activity is treated differently.

Staying cash heavy keeps you in control and if crap hits the fan you need control in order to maneuver your next move.

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