Filling in the Blanks

Earnings reports are giving investors real-time information to assess economic conditions. They are also able to make more plausible projections for individual companies. The picture is mixed, just as expected. Some high-growth sectors and companies have run into constraints. Nothing grows to the moon after all. Many others are benefiting from a resurgence of their industry and enhanced pricing from inflation. A generalization is that old economy companies are having their day and many new economy ones are faltering.

The consumer is strong. Liquidity is good, plenty of money in the system. There is pent-up demand for travel, social activity, and a little less for goods. In some cases, it is company-by-company specific. Two companies in the same space may have quite different experiences. It may be that some brands have market power over other brands. It’s too hard to draw too many conclusions here, but such specificity might point to tightening monetary conditions; still good, but not enough to float all boats.

The Federal Reserve has made it clear that they intend to slow the economy to combat inflation. We are probably seeing early signs of that. This doesn’t mean that all sectors are in trouble, but it will be increasingly more important to be very specific with investment selection. In short, this presents a more challenging investment environment. The Bull and his partners are picking their way through this. Stay steady, my friends.

The Lonely Bull