The US economy and corporate profits have been strong. It’s times like these that investors should start to worry about monetary policy tightening killing the bull market. This infographic will help explain why.
The US economy is strong
But is in danger of overheating
Long-term market indicators signal a recession 12-24 months away
US Federal Reserve (Fed) indicators point to rising inflation ahead
Source: NY Fed Reserve, Bloomberg
Central banks acting pre-emptively to contain inflationary risk
US Fed containing pressure by:
Selling assets from
Absorbing fiscal stimulus from Trump’s tax cuts also means the central bank will need to raise rates much more quickly
US valuations are expensive, suggesting returns over next 10 years will be weak
Valuations are the most important driver of long run market returns
We are positioned defensively, and await better opportunities
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