Dan Smereck, Managing Director & Principal, Strategic Asset Alliance
Alton and Dan highlight SAA's review of the second quarter and what we might expect going forward. Highlighted in this ~10 minute video include adverse market events, state of the bond market, supply-driven inflation, and consumer savings.
In Q2, only major investment areas that saw any material gains were inflation-driven: oils, commodities, and cash.
In the worst case, the U.S. Taxable and Tax-Exempt Bond markets experienced negative returns that were between three and four standard deviations from an annualized return expected over a 7-to-10-year horizon (i.e. the edge of black swan events). It’s the magnitude of this negative, fixed income performance shock that is temporarily wreaking havoc with mark-to-market balance sheets.
The Fed can only do so much to stem inflation - the COVID-19 pandemic created a shock to supply-related factors that is going to take some time to sort itself out.
With approximately $2T of excess savings remaining from the COVID miasma of 2020/2021, SAA expects these factors to constitute a “net” inflationary tailwind even as consumers begin to change or consider changing consumption behavior