Inflation is a Distraction, Focus on Earnings
Everyone's talking about the rise in inflation and where it's going. Government actions to boost the economy during COVID, as well as constrained and disjointed supply patterns have messed up our normally highly tuned economy. This, coupled with an increase in oil and housing prices have led to an inflation CPI jump of 7%, the highest since 1982.
This is being factored into interest rates, which have been on the rise, and over the last six months have dampened the prices of many stocks, particularly highly valued SPAC-based, biotech, healthcare, and technology stocks with little or no earnings. But we should look through the dark clouds of inflation and the market turbulence we are seeing. Inflation is not expected to continue to rise as the impact from COVID diminishes, earnings growth remains strong for many companies, which we shouldn't overlook in still what of the one of the most exciting technology-based migrations we have ever seen. Apple (AAPL), Google (GOOG), Meta Platforms (FB), Netflix (NFLX) all have strong earnings, and in our opinion, still inelastic demand for their services leaving them impervious to inflation in the short term. Valuations are at the upper bounds for most, so we'd look to acquiring more on any price drops, but over-waiting for that to occur, could leave you out from the continuous, and above-average capital gains that we see in the future.
January 19, 2022