Growth Cycle Detour – Q3 2022 Look Ahead
We think we are in the midst of a growth cycle detour. 1
We believe we will have a period of suppressed consumer animal spirts, but that won’t be a permanent trend. This will mostly be driven by the simple fact that interest rates will moderate sooner than most anticipate. Why? Because inflation is largely being driven by supply side issues rather than pure demand. 1
We recognize the Federal Reserve’s interest rate setting policy will have little to no impact on supply side inflation. Combine that with the real threat that we are close to a mild recession; and we believe interest rate hikes will come in the form of a series of brief bursts then perhaps pause later in the year.
The first order question investors should be asking is how long will this market malaise last? When looking at recessions, the periods are relatively brief. 3
Take a quick look at other historical data points on how long bear markets last here. After working through 6 prior cycles (1987, 1991, 2001, 2004, 2008, 2020) I’ve learned one thing; growth is hard to permanently kill. We are in a growth detour.
Take a look at our Q3 2022 Look Ahead here
Watch our narrated version here
Review our latest video with best-selling author of Psychology of Money, Morgan Housel. See what’s more important that investment returns.
Tim Phillips, CEO, Phillips & Company