A Glass Half Full

Before expounding on reasons for optimism, the Bull must admit that he and his partners have a predisposition for that outlook. Furthermore, we believe that to be a good long-term investor, such an outlook is necessary. After all, why would you invest money today for hopes of a better payback in the future? There is no need to expound on all the negatives out there. The 24-hour newsfeeds do that in spades. However, not covered well are the many positives.

Did you know that inflation has been halved in a relatively short period of time? The headline number is running at four percent. The long-term history of inflation is closer to three percent, not the Federal Reserve’s stated target of two percent. Getting to that target may be unrealistic in a world that is deglobalizing, spending more for defense, and more importantly, demographically getting older. Older populations become less productive and require greater resources. They may not admit it, but the Fed’s target will eventually have to be adjusted to the more realistic three percent historical average.

Our economy is essentially at full employment. There are more jobs than currently can be filled. What’s so wrong with people working? Remember, there are two ways to bring inflation down: curtail demand or increase supply. Increasing goods and services is what more working people does. Competition is the best way to impose price discipline. That is happening. So, now that interest rates are modestly restrictive, demand has a drag, but with people working, more is being produced. Time is all that is needed now, and inflation will continue to soften.

            The Bull has not even mentioned the upcoming benefits from the Chips Act, Infrastructure Bill, and the Inflation Reduction Act. All these are supply-side positive, more work more supply, and probably no recession. Sure, there can be a slowdown, but even so it would most likely be mild. Profits in most industries are high and likely to stay that away. Be optimistic and, at least, stay steady my friends. The Lonely Bull