The Winds of Change

The last 20 months have been a most unusual period, thanks primarily to the pandemic, yet many things feel like they haven’t changed over that time span. Each day seems like all the others. Nancy and I mostly stay home and deal with email and Zoom calls – whether relating to work matters or grandchildren. Weekdays don’t feel that different from weekends (this was especially true pre-vaccine, when we rarely ate out or visited others). We’ve had only one one-week vacation in two years. The best way to sum it up is through a comparison to Groundhog Day: every day feels a lot like the day before.

What has changed in our environment in the last 12 months? We’ve seen an election and change of president, as well as increased sensitivity on issues of race, inequality and climate change – but so far with few tangible results. Fortunately, vaccines were developed, approved and distributed. Thus, Covid-19 subsided, but there was a reemergence spurred by the Delta variant, and there might be more.

In the business world, there’s little that’s new:

  • The economic resurgence that began in the third quarter of 2020 – with the greatest quarterly GDP gain in U.S. history – remains underway.
  • The securities markets, which began to rally in March 2020, have continued to rise.
  • Worry about rising inflation has turned out to be well founded thus far, but there is still no consensus as to its primary cause (Federal Reserve policy or supply chain/labor market bottlenecks?) or whether it will prove transitory or long-lasting.

All three of the conditions listed above were present months ago, and they’re little changed today. Thus, in the investment environment, it’s still Groundhog Day. Yet there are changes taking place, and they’ll be the subject of this memo. My focus isn’t the “little macro” changes, like what will happen to GDP, inflation and interest rates next year, but rather the “big macro” changes that will have an impact on our lives for many years. Many aren’t actionable today, but that doesn’t mean we shouldn’t bear them in mind.