“I think where we’ve been a little bit off is just with respect to timing. Inflation has remained stickier than we thought it would be,” he said.
“There are a lot of ingredients in place for a potential rally, not the least of which is under-positioned investors. But, there doesn’t seem to be a lot of risk appetite out there in the marketplace right now. So that could be some nice kindling for a rally.”
White thinks all the interest rate hikes will force a recession, he said Picton Mahoney is expecting the environment that could emerge from that will look like the 1960s and early 1970s, where investment and economic cycles were shorter and more violent, seesawing between inflation and disinflation.
“That will probably make for shorter, more volatile cycles going forward,” he said, noting that he’s already looking at how to build portfolios when the traditional 60/40 portfolio allocation that has benefitted investors for the past four decades with declining interest rates won’t work as well.
“If we’re in a new environment over the next decade, or more, where cycles are shorter and more violent, portfolios need to be better diversified and have more inflation exposure built into them, and maybe being more tactical with some of those traditional assets, like stocks and bonds,” he said. “So, it’s really having a better framework to seek out more diversification to return.”
