Chris Blumas' Top Picks: December 17, 2021
BNN Bloomberg
Top picks from Chris Blumas, portfolio manager, Raymond James Investment Counsel
Chris Blumas, portfolio manager, Raymond James Investment Counsel
FOCUS: North American large cap stocks
MARKET OUTLOOK:
Inflation and the tapering plans of the Federal Reserve continue to dominate the headlines. While there is no shortage of worries facing investors these days, these two variables appear to be the most significant.
Earlier this year, the Federal Reserve gave the market notice that it was going to start aggressively tapering its bond purchases. The Federal Reserve recently announced plans to accelerate this tapering by $30B per month. Going forward, this translates into $130B of bond purchases (or future liquidity injections into the capital markets) from now until the end of Q1 2022. Overall, an injection of this magnitude is significantly less than the $1 trillion that was originally expected to be injected when the plan was introduced. This change suggests that the wave of liquidity that has driven assets prices higher over the last two years is starting to crest and reach its upper limit.
Inflation is rising around the world at a rate that hasn’t been seen for many decades and could stick around longer than initially expected. Pent up demand and supply constraints brought on by the global pandemic have caused commodity prices and shipping costs to soar. With exceptionally low nominal interest rates and negative real returns, investors holding cash and low yielding fixed income securities risk a loss in purchasing power over time.
