Weekly Commentary

Last week was a classic reminder to those that believe they can outsmart and outwit equity markets. The notion that someone has a crystal ball into what moves millions of equity investors should be debunked for the time being. Our basic ground rule is equity returns occur in brief bursts and if you miss just […]

Once again, we are left in monetary limbo. The Federal Reserve raised interest rates by 75 basis points last week, taking the Fed Funds rate to 4%. Unfortunately for investors trying to understand how to value future cash flows, the Federal Reserve was also uncertain about the trajectory of forward rates. What was once anticipated […]

At Phillips & Company we interact with thousands of clients each year. The data points we gather by listening are incredibly powerful. It’s not infrequent at this stage in an economic cycle, especially with the massive drawdown in portfolios, that clients ask why we don’t move to cash and get out of the way? It’s […]

It’s a difficult task as an investor to allocate capital when we are in the midst of so much interest rate uncertainty. The formula is pretty straight forward for equity investors. We want a premium return over the risk-free rate (10-year Treasury). Everyone might want something different in excess, but we all suffer the same […]

  “No amount of sophistication is going to allay the fact that all of your knowledge is about the past and all your decisions are about the future.” Ian E. Wilson (former Chairman of GE) Last week’s inflation data dealt a crushing blow to any hope of avoiding the full measure of Fed’s rate increases. […]

At the heart of the economic debate surrounding inflation is consumer demand. I’ve argued that around 60% of inflation is supply driven, but that’s not part of the current conversation. The argument goes something like this: if inflation moderates the Fed can pause rate increases and investors can develop a better picture of future earnings. […]

Our Q4 2022 Look Ahead is available for review. The video link is here and the PDF version is here. In this post, we highlight some key themes we see in the coming quarter. The Fed is on course to move the terminal fed funds rate to 4.25% by year-end. Historically the duration of time […]

After another painful week on Wall Street a healthy dose of despair might be setting in. The S&P 500 closed near the bear market low and is now down 23% from the peak in January. 1 Investor sentiment is now back to Great Financial Crisis levels according to the American Association of Individual Investors (AAII). […]

Last week’s extreme negative market reaction to recent inflation data adds more salt in the wound. With an almost certain 75bp rate increase coming this week, the S&P 500 dropped 4.77% last week in anticipation of the lift. 1 This year the S&P 500 is down 19% and the conservative 60/40 (equity/fixed income) portfolio is […]

Tomorrow we will get a critical update on inflation festering in the U.S. economy. Expectations are pointing to a lower reading, which could create a fear that the Fed will overreact by raising rates much higher than needed to moderate inflation. 1 It’s hardly a surprise to see a significant downshift in earnings expectations for […]