So, I mean, I think T-bills are attractive. But you do have this kind of neutral equity environment. We have yield curve inversion, a number of potential recession signals as you look out longer. LYN ALDEN: So I think this year, you have to kind of expect a choppy sideways rough market. So how should investors position their portfolios? I think that's probably going to continue until either you bring in a lot more energy production globally or they rein in the deficit as a percentage of GDPs to a significant degree. And so I actually think that when you look out several years, they can temporarily get down- inflation down if you have a recession or a pretty severe kind of slowdown and growth.īut any time they want to have a reacceleration in growth, I think inflation's likely to return. On the other hand, because we're still running these background pretty large fiscal deficits that actually grow larger as interest rates increase because the government's paying more interest on its existing debt load, that's actually a background inflationary force because that's more money that's going into the economy.

But I think they're going to have struggles doing it longer term because it's another area where it's being opposed, right? So tighter monetary policy can reduce some of the private sector activity, right? Obviously, very interest rate-sensitive industries, such as housing, such as unprofitable tech, these areas are obviously slowing down, fewer workers, overall less consumption, less activity, deflationary asset prices. LYN ALDEN: I think it could happen temporarily. But nevertheless, as far as the Fed's goal to bring inflation down to 2%, do you see that happening?

Let's talk a little bit about the Fed meeting that's going to happen this month and the expectation of a 25 basis rate point hike. And so it's not surprising we've seen kind of a choppy sideways market ever since then. And then starting beginning of quarter four of last year, you've had more of a sideways liquidity environment because of these opposing forces. That was in line with the market continually going down. And so if you look back last year, you had falling liquidity for most of the year. Because they're unable to issue new bonds, they instead have to do extraordinary measures, such as draw down some of their existing cash balances.Īnd so that's actually been somewhat of an opposing force. And one of the reasons they're drawing it down is because of the upcoming debt ceiling impasse. And as they draw it down, it goes back into the market. And that's actually a net positive for the market because, basically, you can imagine, as money is kind of stuck in their cash void, it's not really being used. On the other side of that, you have the Treasury General Account that has generally been draining since the middle of last year. And historically, that's not very good for most asset prices. So that's a liquidity drain on the market. And so there's actually more bonds entering the market than there would be just from issuance alone. And basically, they're letting bonds roll off their balance sheet. And that basically means that rather than them buy the bonds that are being issued by the government, the private sector has to buy those bonds. The Federal Reserve, because they're reducing their balance sheet, are pulling liquidity out of the market. LYN ALDEN: So right now, we have two major opposing forces in liquidity. Talk to us a little bit about what this does to the financial plumbing and the markets overall. And central banks, except for the Bank of Japan and for China, have been withdrawing liquidity from the system. So let's take a look at liquidity because I know that you watch this.

Lyn alden investment strategy