Thought Leadership Resource Center
The Federal Reserve and Chairman Jerome Powell will hold its latest policy meeting on Wednesday, May 3rd. The central bank is largely expected to deliver on another 25-basis point hike to the Fed Funds rate, bringing the benchmark rate to a range of 5.00% - 5.25%. This would mark the 10th straight rate hike this cycle and take the Fed Funds rate to its highest level since 2007.
Read MoreThe most significant challenge for the U.S. economy has shifted from an uncertain path for monetary policy to a potential banking crisis and associated issues connected with tightening credit conditions.
The supply of bank credit is an important driver of macroeconomic outcomes and a contraction in credit availability serves to further slow already decelerating economic activity. Banks will likely raise lending standards in response to the current set of problems and the pace of new loan origination, for businesses and consumers alike, will decline.
Read MoreWe have long promised our clients that when the facts change, our outlook would change. This said, our base case has shifted to a less constructive view of the economy over the next 12 to 18 months. We now expect that economic growth to disappoint and a recession to occur 2023. This said, we are not expecting the recession to be particularly long or deep. By mid-2023 the worst may be behind us, and risk assets could begin a sustained move higher.
Read MoreThe S&P 500 suffered its worst half since 1970 after inflation and recession concerns sparked a 21% sell-off. This year’s first half performance was strikingly similar to that of 1970 (also down -21%) and in both periods, high inflation was the issue. It is interesting to note that the second half of 1970 saw the S&P up 27%. Of course, that does not mean that's how it will go for the back half of 2022; however, we believe it is likely the market will move higher if inflationary pressures subside.
Read MoreInflation is a monetary phenomenon and in the short term can be affected by supply/demand dynamics. The Investment Policy Committee of Clearwater Capital has written extensively about the dramatic rise in the M-2 Money Supply over the last two years emanating from fiscal spending which ‘flooded the world with cash’ following the COVID shutdown of the economy.
Read MoreTo say that we are living in “interesting times” would not do justice to what we all have experienced since the COVID-19 outbreak made headlines in February. What began as a serious health crisis quickly turned into an economic collapse as government leaders issued lockdown orders and essentially brought large parts of our economy to a standstill. Never before has the United States shut off its economy by proclamation. Interesting times indeed!!
Read MoreDisclosures:
THIS COMMENTARY HAS BEEN PREPARED BY CLEARWATER CAPITAL PARTNERS. THE OPINIONS VOICED IN THIS MATERIAL ARE FOR GENERAL INFORMATION ONLY AND ARE NOT INTENDED TO PROVIDE OR BE CONSTRUED AS PROVIDING LEGAL, ACCOUNTING, OR SPECIFIC INVESTMENT ADVICE OR RECOMMENDATIONS FOR ANY INDIVIDUAL. ALL ECONOMIC DATA IS DERIVED FROM PUBLIC SOURCES BELIEVED TO BE RELIABLE. TO DETERMINE WHICH INVESTMENTS MAY BE APPROPRIATE FOR YOU, PLEASE CONSULT WITH US PRIOR TO INVESTING. INVESTING INVOLVES RISK WHICH MAY INCLUDE LOSS OF PRINCIPAL. This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities, insurance products, or to adopt any investment strategy. The opinions expressed are as of the date of writing and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by Clearwater Capital Partners to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. Past performance is no guarantee of future results. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. Investment involves risks. International investing involves additional risks, including risks related to foreign currency, limited liquidity, less government regulation and the possibility of substantial volatility due to adverse political, economic or other developments. Index performance is shown for illustrative purposes only. You cannot invest directly in an index. S&P 500 is a registered trademark of Standard & Poor’s Financial Services, a division of S&P Global (“S&P”) DOW JONES, DJ, DJIA and DOW JONES INDUSTRIAL AVERAGE are registered trademarks of Dow Jones Trademark Holdings (“Dow Jones”). The two main risks related to fixed-income investing are interest rate risk and credit risk. Typically, when interest rates rise, there is a corresponding decline in the market value of bonds. Credit risk refers to the possibility that the issuer of the bond will not be able to make principal and interest payments.
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