Jul 25, 2022
Long-term inflation expectations by bond market investors have been cooling off noticeably since the peak reached in April as economic expectations have been coming down, some commodity prices like oil and copper have fallen sharply from the peak and the central banks have become more hawkish than thought. Make however no mistake: current inflation numbers are still red hot and create substantial monetary and economic challenges for policymakers, for businesses and private consumers alike. It is no business as usual as we adapt to an environment of higher interest rates and economic disruptions. In our equity portfolios, we continue therefore to focus on undervalued businesses with strong earning power who have control over their destiny. The median quality business we own in our European Value Fund now trades at 10 times 2023 forward earnings, a significant discount to the an already cheap European stock market.