Strategic Briefings & Presentations
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Global Economic & Capital Market Q1/24 Outlook
We now observe the Fiscal and Monetary Hangover anticipated due to reduced potential growth (due to poor policy decisions) and persistent higher inflation requiring higher global interest rates. Global bonds with still high inflation, increasing debt and high deficits, while reducing central bank holdings (QT) increase supply of government debt. With now negative earnings growth and high US large growth valuations, risk of a signficant correction is hight. Global real growth is slowing and risk flirting with moderate or intermittent recession in 2023. Thus, we believe risk of a global debt crisis is elevated due to: rising rates (need for steeper yield curves) + QT + persistent inflation + high deficits + currency & bond volatility + liquidity concern + bond leverage. Higher inflation expectations (labor, housing, services) for longer suggest the need for normalizing yield curves. Competitive Advantages of EMs reversing with moderating globalization and onshoring. Emerging Market earnings growth lags with lower margins, geopolitical: China + Russia. We expect a return to Natural Order as the US economy and capital markets are rewilding.
Q3/2022: A Defense of Free Market Capitalism
Capitalism is responsible for the greatest accumulation of wealth in human history. American Capitalism has defined our economic organizing philosophy for two centuries as a proven force for prosperity and common good. Capitalism is the only organizing system that is compatible with individual freedom and respects inalienable rights, whereas Collectivism believes that each individual exists only for the sake of the collective group under command of government. Where the means of production are privately owned and managed to maximize shareholder value, free market competition ingrained with principles of individual freedom, liberty, property rights, and right to pursue happiness bolsters prosperity for the greater good under rule of law. Stakeholders, such as employees, vendors, and customers are generally better off too. This is why Free-Market Capitalism has been resilient for centuries, and is the only alternative to dismal Collectivism. Success of Capitalism, is rooted in our founding values and principles 245 years ago,, but alternatives to Capitalism are fundamentally flawed and incompatible with aspirational human nature. America still enjoys the greatest broad-based benefit from productivity growth enabled by Capitalism. The US Constitution bestows freedom to "secure the Blessings of Liberty to ourselves and our Posterity". Rooted in the Declaration of Independence is the idea "all men are created equal" with natural rights of "life, liberty, and the pursuit of happiness". These foundational ideas define American economic organization, and are indeed most compatible with Capitalism. They are not compatible with Socialism or any other collectivist economic organizing system.
May 2019: Capitalizing on Global Future Themes
A Future Theme herein is a thesis or proposition that could have such substantial impact that when recognized will shift consumption, disrupt competition, or impact our lifestyle for a significant portion of the population. We seek to identify key drivers of differentiation and relative global competitiveness. Businesses are leveraging cost benefits to realize higher profit margins, disintermediating labor and reducing unnecessary tasks. Yet, simply identifying a trend or theme may not be sufficient to realize excess return---Earnings potential, profit margin, and current valuation also affect future returns. We find value in the exercise and experience of identifying Future Themes and discussing how they can affect our investment thesis. given extraordinary return potential of secular themes, not surprising thematic investing has become popular. We seek to understand key forces to uncover just a few opportunities that have potential to generate compelling excess returns over a long investment horizon.
Strategic Insights: Alternative Reality (updated)
This Strategic Insights discusses a few myths and dirty little secrets of alternative investing revealed from a decade of research, experiences, and much thought on the topic. Alternative investments by definition are distinct and dissimilar, in contrast to stocks and bonds---decisions to allocate to alternatives must be prepared to respond to the practical question, allocation to what? The attraction of alternatives promising higher returns with increased diversification is persuasive. So, we sought to differentiate the compelling opportunity in private markets versus the generally disappointing practice of alternative fund management. (Originally published Q4 of 2016.
Long Horizon Investing in a Short-term World.
We live in an era of exceptional and accelerating innovation driving profit margins, and thus earnings growth. So why have private market returns been disapppointing? Asset owners can do better, but they must be willing to think differently about investing behaviors. We examine the various challenges that investors face trying to achieve their investment objectives and explore theories for the increasing short-termism of investors. Manipulated bond markets must normalize, which must have long-term consequences for all asset classes.
Global Market Strategy
How should we think about the key variables and relationships that influence our Strategic and Tactical Asset Allocation decisions? In this presentation we lay out a framework for making asset allocation decisions based on fundamental econometric variables. See Economic & Capital Market Outlook for current macroeconomic state and our forecasts.
Disclaimer: Information published herein is the opinion of Strategic Frontier Management, LLC and is for investment education and illustrative or informational purposes only. It is not intended to be a recommendation regarding purchase or sale of any security. Strategic Frontier Management, LLC is not a Financial Planner or Tax Accountant. All investment decisions entail risk and there is no guarantee that investment strategies will achieve the desired results under any given market conditions. No representation is being made that any account, product, or strategy will or is likely to achieve profits, losses, or results similar to those described. No part of this material may be reproduced, in whole or in part, without prior written permission of Strategic Frontier Management. © 2023 Strategic Frontier Management.