What does yesterday’s FOMC meeting mean for investors? Risks remained skewed to the downside. We know inflation is a problem. The Fed wants to hike rates and reduce its balance sheet. It’s hard to see a scenario where markets absorb these crosscurrents without higher levels of volatility.
From my perspective, the cake has been baked. Interest rates are rising. Inflation is a problem. There is a clear rotation from growth to value. Ironically, these trends have prevailed for 12-15 months, and I don’t see them changing anytime soon.
Astoria remains steadfast that portfolios should be tilting towards value-centric assets. Growth stocks will continue to suffer with higher rates and value stocks still offer a margin of safety. Astoria continues to gravitate toward inflation-sensitive assets. They are cheap, under-owned, and could potentially provide support for portfolios if inflation remains high. Lastly, Astoria recommends being globally diversified and owning alternatives.
Investing is about looking forward, not in the rearview. Unfortunately, many investors fall victim to looking backward when building a portfolio.
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Best,
John Davi
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