Economic growth and inflation each rise or fall resulting in four discreet economic environments that may exist at any point in time.
By investing a portfolio among assets that are tailored to perform in each of the separate four environments, clients can achieve more consistent performance with less volatility than the broad stock market.
When economic growth rises and inflation falls growth stocks take center stage. Commodities tend to lag while bonds can provide healthy returns.
When economic growth and inflation both rise we see commodities and commodity-related companies often outperform. Conversely, during inflationary periods bonds can become quite volatile.
When economic growth falls and inflation rises investors often face meaningful difficulty. Few assets protect wealth during these periods, even U.S. treasury bonds may fail to offer refuge.
When economic growth and inflation fall together volatility typically follows. Few assets shelter a portfolio and even fewer provide opportunity for growth.