Having a strategy for each outcome is the key to getting through the confusion. In one environment, “Cash is king.” Yet, in a different (and quite possible) environment where the purchasing power of the currency is declining, cash provides the opposite of security. High growth at a high multiple has been very rewarding, but this could change dramatically in the months ahead. Commodities that went through several years of underperformance have had strong performance in 2021 so far. However, if the Fed is right and much of their run is over, then they will once again go back to being a frustrating investment allocation. Bonds in general have provided good risk adjusted returns for almost 40 years, but 2021 could be the start of a reversal for that sector. Then again, maybe not. Value stocks with low P/Es seem like a good bet during times of uncertainty, and have had a good 2021 so far… but in many cases, the reason they are low P/E value stocks is because they struggle to grow consistently, or they have over-levered balance sheets.
In any scenario, opportunities are being created. Our job is to find them.
The bottom line for us at Guild Investment Management is to remain flexible, nimble, alert, and open-minded during this period of debate about the future. We don’t want to be so stubborn as to be stuck in positions, waiting for the markets to arrive at our conclusion.
