The Crux of the Matter

If you believed that interest rates were going to be 0-2% would you invest capital differently than if you believed they would be 5-7%?

If you believed that inflation would run 1-3%, would you invest differently than if you believed it would run 4-6%?

Does one’s view on interest rates and forward-inflation impact their expectations for P/E ratios (market valuations)?

If credit is going to tighten (ease of access to capital and cost of capital), would that alter one’s allocation to corporate credit, private equity, public equity, and a host of other risk asset classes?

Would one’s view on the U.S. dollar potentially influence their allocation to domestic vs. foreign assets?

And regardless of how one’s views on interest rates, inflation, credit, and currency impacts the decisions, they make on investment decisions, will all of these things impact the expected return on all asset classes (whether or not it alters your weightings in such asset classes)?

And if these things impact expected returns in various asset classes, does that have practical significance to one’s financial planning, accumulation goals, withdrawal goals, and other such tangible dimensions of wealth management?

The answer to every question above is YES, and pretty much all emphatically so, which means that every person reading this has a real dog in the hunt when it comes to the great economic debate of our time:

Links mentioned in this episode: