March 2021
How hot is too hot? This is the difficult question investors have had to grapple with over the first quarter of 2021. As the economy reopens, the massive stimulus is digested, and supply chains become stretched, the robust growth outlook for the US economy has sparked impassioned worry over inflationary pressures.

February, 2021
Over the past week, the structural underpinnings of the nascent, nearly one-year-old bull market, have come under attack. A violent move higher in long-term treasury rates, with the 10-year Treasury bond yield rising at one point over 50 basis points in just four weeks, has tested the mettle of the market whose reliance on cheap credit, liquidity, and relative value had propelled indices to all-time highs. Ironically, it has been robust growth expectations for US GDP growth in 2021 that have fueled the unorderly treasury market rout. Higher long-term interest rates pose the most acute risk to high-growth stocks where valuations have reached levels not seen since the dot-com era.

January, 2021
We begin our first letter in 2021 amidst a historic moment in global markets. While analysts prepare for earnings reports for over 30% of the S&P market cap in the final week of the month, Wall Street is instead besotted by an incredible short squeeze of epic proportions. Perhaps the poster child of this phenomena, GameStop, has seen its shares rise well over 1000% in 10 short trading days. Other stocks touted on the popular “Wall Street Bets” Reddit group such as AMC have seen their shares surge in recent days. The movie theater operator whose business remains undoubtedly challenged is currently valued at multiples of is value before the pandemic struck. Throw the textbook out the window it seems.

December, 2020
In our final letter of 2020, we wrap up a tumultuous year with an eye towards what may shape up to be an equally daunting 2021 in markets. Global markets are poised to end the year in the continued state of Fed induced euphoria that has grown to a crescendo as equities push to new highs. Market breadth, which had eluded the relief rally over the summer has returned with gusto as lagging value and small cap stocks ride the coattails of a reflation trade. While the pandemic remains rampant, optimism over the vaccine has given investors a much-needed light at the end of the tunnel. In this letter we will explore both reasons for continued optimism as well as the multi-factored risks that loom in the coming year.

November, 2020
Over the past 30 days, small-cap value (IWN) has returned 14.51% vs. 1.53% for large cap growth (IWF). While many questions around the various vaccines remain, particularly as it relates to both durability and distribution, investors cheered these results that potentially could provide a spark to those industries most effected by the continued presence of the pandemic. Balancing the resurgent case load in the US and the promise of the vaccine, whether this rotation will endure depends largely on the course of the economy itself and its ability to continue the robust recovery witnessed since the depths of the first quarter.

October, 2020
In September’s letter, we emphasized the dramatic excesses, commonplace across both equity and fixed income markets, fueled by a rush of liquidity provided by central banks globally. This narrative has come into focus as markets wobbled over the course of September, producing volatility unseen since the depths on the pandemic. While risks remain elevated, excess still endures, and catalysts loom on the horizon, our conviction in steadfast, disciplined allocation remains critical.

September, 2020
It is said that markets climb a “wall of worry.” Bears capitulate, new narratives emerge, and investors gravitate towards risk assets fueling a self-fulfilling feedback loop. In 1936, Keynes penned what is called the “Castle-in-the-Air” theory, or what many would call the “greater fool” style of investing; positing that markets are behavior institutions, driven not by intrinsic value but by investors expectations of what the crowd is likely to think in the future. We can think of no better explanation of the past month’s exponential move higher in equity markets.

August, 2020
Investor focus over the past month was pulled in just about every direction as global markets grappled with increased geo-political tension, evolving fiscal support, and a better look at second quarter earnings and economic output. On the backs of strong earnings reports and outlooks from Apple, Amazon and Facebook, domestic indices finished the month broadly higher as market leadership continued to narrow to a select handful of mega-cap companies.