November 2022 Insights
November 2022 greetings from Lion’s Eye Wealth,
It would be so easy if we had precise coordinates we could map to with regard to financial markets. We rely on historical models to guide us in finance, yet when history informs on what we should do to curb inflation and the government with regard to spending isn’t doing it, on top of a multitude of shocks to the system, we enter an area of gray. Our job is to map our clients through the fog to achieve positive returns hedged to inflation, volatility, the Fed’s moves, and government spending.
I’ll be interviewing Andrew Beer soon who runs a managed futures strategy I’m fond of, it has returned 33% this year alone, who just stated on a conference call that we are going through a regime change. He’s not alone in this commentary. What does this mean? As I have articulated in newsletters and on the podcast, as well as in meetings and calls with all of you, we are clearly not in the 10-year run-up we enjoyed prior to 2022. Some big firms continue to say that we are in a bull market just as they said inflation was transient in 2021. I am not here to lie to you, I am here to tell you the truth so I can best prepare all of you for the current market dynamics and what is to come.
Regime change means that there are fundamental shifts occurring both due to government and Fed policies on top of an overheated market. The last 10 years could be viewed as an extreme and as well extreme efforts due to panic to avoid inflation so that the US wouldn’t become Japan. $40 trillion dollars poured into the economy has created a situation that we are now all having to live with. As I have also said on my podcast and as Andrew and many of the analysts and managers I value state, inflation that began in 2021 is now becoming entrenched as it did in the 70’s due the length of time it has been going on. We don’t forecast that we will ever return to pre-2022 CPI figures. The point is, at a certain level, there is a capitulation due to some ill informed decisions.
The Fed is adamant it will continue to raise rates until it curbs inflation. To date, since June, the actions have lowered inflation roughly 1% only from a record high. Will government begin to curb spending? We don’t know but what we do know is how much money the government even in 2022 continues to pour into the economy despite inflation which isn’t helpful at least historically. The other issue that must be solved is energy and US reliance on other countries since this is critical to most everything in the economy. Until those issues are brought into control, many of us in finance aren’t sure when a recovery can begin, meaning that we should prepare for at least 3-4 years of choppy waters, and potentially longer.
This is a lot to consider for all of us living through this that aren’t at the highest echelon of the elite. What are we to do as people going about our work and investing to make our money go to work for us - a basic precept of wealth building.
Fortunately, despite the chaos, we’ve been able to identify investment opportunities that fair well during the current market conditions and we have allocated investments to those areas. We will continue to do so as we watch the economy and market carefully. We also believe the chance of more unpredictables is high and are ready to move on any “surprise” news.
Below, per usual, we outline investment opportunities we are keen on. I’ve also put links to the podcast and video if you’d like to tune in to those. I will let all of you know when my interview with Andrew Beer is live. Please don’t hesitate to reach out if you have any questions about the above or portfolio allocations.
All the best,
Lisa Durant, President & Founder of Lion’s Eye Wealth
INVESTMENT IDEAS
*Please note the following ideas are meant for educational purposes only. Lion’s Eye Wealth invests clients only after a careful review of assets and liabilities, financial goals, risk and time assessments, and after understanding client preferences. If viewing this and not a current client of Lion’s Eye Wealth, please understand we have a process we must go through prior to launching into any custom portfolio. This is not meant to be specific investment advice. If with a different advisor, we recommend that you review this with your current advisor. Thank you.
50-55% Stock/Equities to 50% Alternative Investments & Fixed Income
You’ll notice a slight adjustment in our percentage allocations due to current market dynamics with the inclusion of fixed income due to US Treasuries.
Managed Futures
Managed futures strategy that replicates the SocGen CTA hedge fund index with the same big trades the 20 firms indexed do without the 500 basis point fee and easy access through an ETF, expense ratio .85 or 85 basis points. The strategy is currently up 33% YTD and consistently performs well during volatility.
US Treasuries
A short duration US Treasury ladder, no more than one-year out. Rates have been yielding 4% which we realize is not beating current inflation figures but is still a conservative play and earning something versus cash on the side that is eroding to the tune of 8.1% with inflation.
Real Estate & Real Assets Funds
Real estate and real assets are a hedge to inflation. The real assets fund holds private farmland and infrastructure which is expected to outperform for years to come.
Commodities & Gold
Commodities and gold are hedges to inflation. Since the energy component has yet to be solved and global conflicts remain, we continue to see oil as a solid investment. There are a number of ways to access gold, we primarily do so through ETF’s, holding physical gold in the form of gold coins or other also works.
US Consumer Staples & Defensive Stocks
This is yet another area that performs well with inflation and potentially stagflation. We access both through ETF’s and direct stock holdings.
Options & Dividend Strategies
Options strategies don’t care if the market goes up or down as they are essentially placing bets on market movement. Options strategies are embedded in a number of investments we like and as a specialty investment through a SMA. Our options partner just launched a new dividend strategy we’re also keen on, income through a volatile market, primarily invested in Blue Chip companies.
US Semiconductors & US Rare Earth Minerals
We like both sectors for the reasons we’ve outlined previously. The China-Taiwan conflict if escalated means a focus on what we can manufacture at home, the recent bill also sends money to these companies. The most recent bill that can’t be seen as “inflation reduction” had funds going to US Rare Earth Mineral mining which fuels the clean tech economy, a longer term buy and hold strategy we feel is worth having.
Link to Creating Real Wealth podcasts: https://www.buzzsprout.com/1983145/episodes
*The Creating Real Wealth podcast is available on Spotify and most major podcasting and music platforms.
Link to videos: https://www.youtube.com/watch?v=-ciakTq2yWY
