What should investors do now?

This indicator reached 18.9 in April, the lowest reading ever, with data going back to 1881
Risk free rates have hit all time lows in response to the crisis
  1. Understand the narratives around growth and inflation
  2. Find assets that are trading attractively in relation to one’s understanding of these narratives
  1. Continued development of artificial intelligence and associated gains in productivity
  2. Innovation required to address concerns around C02 emissions
  3. Impacts of globalization on those living in poverty, particularly in South Asia and Africa
  4. The possibility of new frontiers to for individuals to innovate in: Ex. Space
  1. Demographics: Low population growth rates and rapidly growing elderly population will cause labor force growth rates to shrink and turn negative in some countries.
  2. Debt: Global Debt to GDP levels are at all time highs. There are persistent and growing deficits at the federal and state levels in the U.S. Also, very importantly, the effectiveness of monetary stimulus is reaching its limit.
  3. Limited runway on historical innovation platforms: As software, mobile and the internet have now achieved widespread adoption, growth rates will continue to slow.
  4. Permanent lifestyle changes in response to the pandemic: Ex. commercial real estate losing value because of permanent work from home, airlines losing value because of sustained drop in business travel, etc.
  1. Declining investment in energy and materials in response to Covid could result in an inflationary impulse in 2021: companies in these sectors have slashed investment spending and that could lead to inflation once demand recovers, if supply isn’t there
  2. Growing nationalism/peak globalization: if developed nations continue to work to bring manufacturing back home, this could result in higher prices for goods, as companies moving manufacturing overseas was a deflationary force over the past few decades
  3. Redistribution of wealth: policies enacted to transfer money from the investor class to the lower/middle class will likely result in greater consumption and inflation associated with it
  4. Shifts to address CO2 concerns: policies enacted to limit fossil fuel use will result in higher prices if alternatives are not as cheap
  1. Excessive debt levels: when governments, corporations and individuals take on debt, they are capable of consuming more than they produce. When they pay it back, they consume less than they produce. As debt loads reach historically high levels, we may see lower spending and lower inflation alongside it.
  2. Aging populations: For most people, retirement is partnered with a lifestyle of less consumption and more saving. As the retired population grows, this is a force for deflation.
  3. Technological innovation: As technology enables us to make better products for cheaper, prices will fall (the good kind of deflation).

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