prista@strategasasset.com
Our Latest Takes on the Market
Our Latest Takes
- Lobbying efforts are on the rise as we head towards a busy Fall in Washington.
- Will we see a second wave of inflation?
- Remaining neutral on MBS given ambiguous picture.
1. Lobbying efforts are on the rise as we head towards a busy Fall in Washington.
Washington moved to the backseat for investors since the debt ceiling was raised in June but Strategas’ Head of Policy Research, Dan Clifton, expects this trend to reverse in the coming weeks as Labor Day kicks off a 15-month sprint toward the US presidential election in November 2024. And with the list of policy driven inputs increasing for companies, quarterly lobbying spend has risen for six consecutive quarters. Companies Boost Lobbying Spend Ahead of Fiscal Fights, Regulatory Onslaught & 2024 Elections. We believe our Strategas Policy Opportunities Portfolio is built to take advantage of those companies which have shown the highest score within our lobbying intensity model. U.S. Large-Cap Policy Opportunities Portfolio
2. Will we see a second wave of inflation?
In a study by Strategas’ Chief Economist, Don Rissmiller and team, they observed that over the course of 2,100 years of history across 24 countries, there were 62 inflationary periods. Of which, only 8 occurrences (or 13%) saw only one wave of price surges. Additionally, Don’s team also noted that those second waves of price surges occurred an average of 30 months after the first peak. As we are only 13 months off the peak year over year Consumer Price Index reading from June of 2022, it may be premature to say rising inflation is past us – particularly in light of some anecdotal signs to the contrary such as a rise in labor union strife which have resulted in unions negotiating higher wages along with a small resurgence in oil and energy stocks. With the inflation-anchoring job not yet clearly finished (inflation must come down & stay down), financial conditions easing too early would likely be unwelcome. We should not be thinking about Fed rate cuts currently, in our opinion.
Source: Macrobond and Strategas Securities, as of August 13, 2023
3. Remaining neutral on MBS given ambiguous picture.
Reiterating our May move to neutral within mortgage-backed securities (MBS), Strategas’ Head of Fixed Income Research, Tom Tzitzouris, believes that demand for MBS paper will likely remain weak throughout the third quarter with spreads drifting higher until money manager demand picks up marginally. Today, there are logical reasons why MBS are trading cheap to corporates, and we are not rushing in to go overweight MBS. Some of our reasons why are high yield volatility, strong market confidence in the no recession call (one we don’t share), and even the view that investment grade (IG) credit will face limited refinancing demands for the remainder of this year. All of these are valid today, but by early 2024, or even late 2023, these may no longer be viable arguments in favor of IG over MBS. Each of our Fixed Income Portfolios (the Strategas Go Anywhere Fixed Income Portfolio: Go Anywhere Strategy and the Strategas Core Fixed Income Portfolio: Core Fixed Income Strategy) along with the fixed income sleeves within our Asset Allocation Portfolios (Asset Allocation Strategies) remain neutral within the MBS space
For additional information on Strategas Asset Management, how to access our research or our other investment solutions please visit our website: https://www.strategasasset.com/ or reach out to Patrick Rista, prista@strategasasset.com / (646) 292-7984.
[1] UTL – Utilities, CS – Consumer Staples, COMM – Communications, HC – Healthcare, TECH- Technology, MAT – Materials, CD – Consumer Discretionary, FIN – Financials, IND – Industrials, ENE- Energy
This communication was prepared by Strategas Asset Management, LLC ("we" or "us" or “our”). This communication represents our views as of 8/15/2023, which are subject to change. The information contained herein has been obtained from sources we believe to be reliable, but no guarantee of accuracy can be made. This communication is provided for informational purposes only and should not be construed as an offer, recommendation, nor solicitation to buy or sell any specific security, strategy, or investment product. This communication does not constitute, nor should it be regarded as, investment research or a research report or securities recommendation and it does not provide information reasonably sufficient upon which to base an investment decision. This is not a complete analysis of every material fact regarding any company, industry, or security. Additional analysis would be required to make an investment decision. This communication is not based on the investment objectives, strategies, goals, financial circumstances, needs or risk tolerance of any particular client and is not presented as suitable to any other particular client. Past performance does not guarantee future results. All investments carry some level of risk, including loss of principal.
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