Macro Observations

As much as I hate to admit it, the weekly risk signals are not infallible. False positives are an inevitable part of the investment research process. That’s why I’m always talking about conditions and identifying the scenarios where investors can tip the odds in their favor.

Last week, we spent time in this space talking about the Fed’s new inflation averaging policy, where I raised the possibility of value investing making a comeback. There’s a case to be made. In fact, it could be a fairly strong case. For me, the key is inflation and here’s why.

At this week’s (virtual) Jackson Hole summit, Jerome Powell officially announced a significant change to the Fed’s inflation targeting policy. I say “officially” because it’s been rumored for months and many assumed that this was a shift the central bank would be taking to address the lack of inflation over the past several years.