James Solloway | Source | Chief Market Strategist at SEI
James Solloway
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U.S. companies have so far been able to push higher costs onto the consumer. There hasn’t been much of a decline in profit margins yet—they’ve remained above all the previous cyclical peaks going back to 1947. But we suspect that margins are on the cusp of substantial erosion. It’s typical for profit margins to decline well before an economic recession materializes.
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We’ve been adding to long commodity positions given the recent downturn in prices. Going back to late 2020, we contended that commodities were moving to a more balanced market after a long period of disinvestment and capital discipline by producers.
We continue to believe in a persistent tailwind for commodity prices given the sustained supply disruptions around the world and chronic underinvestment in infrastructure over the last several years.
In addition, the unprecedented monetary and fiscal response to the pandemic could prove inflationary and commodities could provide a potential hedge.
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Central Bank Divergence Set to Emerge
The developed world's central banks will head down different paths over the coming months, according to Jim Solloway, chief market strategist at SEI. The European Central Bank will probably cut rates before the Bank of England, with the U.S. Federal Reserve moving after both, Solloway said, noting
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Treasury Yields, Dollar Snap String of Weekly Gains
Treasury yields and the dollar fall in a week when the Fed was perceived as not too hawkish—after Chair Powell kept a rate hike off the table— and payrolls surprised to the downside, for a change.
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Dow drops more than 500 points after ‘ugly’ inflation report upsets market’s rate-cut expectations
Tuesday’s data shows how the pathway to 2% inflation ‘is not as orderly as the market was expecting,’ said economist Lauren Henderson of Stifel, Nicolaus & Co. in Chicago
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SEI
Chief Market Strategist
started Sep 2009