Disruption and Regime Change
2nd Quarter, 2026
We’ve been here before. Long before ChatGPT stormed onto the scene—poised to rewrite everything from business plans to wedding vows—a different technology swept through American society like wildfire, thrilling young people and eliciting warnings of declining family values.
It’s easy to assume that today’s whirlwind of disruptive tech—robo-cars, AI, brain implants and more—is jolting American society as never before. But don’t overlook the 1920s, when the country’s rapid embrace of cars, radio, airplanes, full-length movies, in-home electricity, etc., created an equally intense sense of innovation gone wild.
~ The Wall Street Journal, May 2, 2026
We need, in my judgment, fundamental policy reforms…I think that means a regime change in the conduct of policy. I think that means a different, new inflation framework.
~ Kevin Warsh, Federal Reserve Chair Nominee, April 2026
It can be a tremendous benefit in the long run. At the same time, it can also lead to maintaining a seemingly undue amount of skepticism in the short run. Being familiar with the numerous booms and busts throughout history can result in a certain level of detachment from periods of euphoria and despair. Yet it can also underwrite a resilience through challenging market environments that leave an investor less vulnerable in periods of significant change.
Today, it would be hard to argue we are not in a period of significant change and disruption. At the same time, it would also be hard to argue that there have not been periods of change throughout history that were just as significant as the rapidly evolving landscape today, if not more so.
The arrival of AI-based technology and tools is clearly a significant economic event. However, the periods that witnessed the arrival of the telegraph, the laying of railroads, the electrification of cities, and the spread of radio, television, automobiles, and flight were also significant in their own right. Those technologies spawned tremendous investment booms, as each represented a leap in efficiency and opportunity. Yet the investment booms that accompanied them were also followed by busts, as the race for profits led to overinvestment and losses among the investments that were eventually crowded out.
It is the nature of significant technological advances to attract large sums of investment capital. It is also the nature of such investment booms, in a competitive market economy, that not all the capital invested during the rush earns the profits it seeks. One important lesson from past boom-and-bust cycles is that major technological advancements, though they may represent great leaps forward for society at large, can also create euphoric market conditions that ultimately disappoint many investors.
As shown in the chart below, the broader U.S. equity market has recently risen to a valuation similar to what was reached in 2000, at the peak of the Tech bubble. At that time, investors were euphoric over the seemingly endless profit potential the internet appeared to represent.
The sentiment then was not unlike what we have recently been witnessing in how investors are thinking about companies directly related to AI, as well as companies supplying the infrastructure. These companies, public and private, have attracted huge sums of investment capital over the past few years, all of which will compete for a share of the profit potential that AI-related technology may represent. Yet the history of past booms suggests that profit potential can ultimately prove more limited than the amount of capital raised to capture it during a boom. In such an environment, the way for investors at large to benefit from significant technological advances is not necessarily as straightforward as direct investment in the companies at the center of the frenzy.
While the railroad boom in the late 1860s and early 1870s transformed travel and commerce across the world, around a third of railroad companies went bankrupt after the Panic of 1873 ended the investment boom. Companies that survived the initial market panic endured volatility and steep drawdowns in their stock prices for years afterward, while the markets sorted out which companies would ultimately endure as going concerns. While the thousands of miles of railroad tracks laid during the boom ultimately proved transformative for the U.S. economy, many of the individual companies that built them did not last. As a result, though records from the time are incomplete, the total return for outside investors who invested directly in rail companies through the boom and bust was likely negative.
A similar process defined the emergence of the mass-produced automobiles in the 1920s. Just like the laying of railroad track, the widespread adoption of mass-produced automobiles transformed manufacturing, travel, and commerce across the U.S. Yet despite that success, investors in auto companies themselves were largely wiped out, in aggregate, during the consolidation in the 1930s: more than 90% of auto manufacturing companies disappeared between 1925 and 1935. While the surviving Big Three automakers dominated auto manufacturing after 1935 and continued to transform the U.S. economy in the subsequent decades, the aggregate return to outside investors in auto companies during the frenzy of the late 1920s was deeply negative.
The internet bubble of the 1990s is a more recent example that many investors today experienced directly. While the rapid spread of personal computing and the internet proved transformative for the U.S. and global economy, estimates suggest that around 70%-80% of outside capital invested in technology companies related to the internet during the boom evaporated during the bust. Approximately two-thirds of tech-related companies did not survive. During the recovery in the decade that followed, the technology industry consolidated in a process similar to the railroad and auto industries before it, and large winners emerged. However, the aggregate return that investors at large experienced remained negative for more than fifteen years after the bubble burst.
These examples of prior booms and busts in response to technological leaps show a clear and consistent pattern: direct investments into the center of a frenzy often attract large capital inflows, much of which is later consumed by consolidation following the boom.
What tends to be lost in the excitement surrounding companies at the center of the investment boom is the transformative impact each major technological advance can have on the broader economy. Although most individual railroad, auto manufacturing, and technology companies went under in the 1870s, 1930s, and 2000s, respectively, the arrival of rail transport, mass-produced motorized vehicles, and the internet each proved transformative for the productivity of the economy as a whole. Though much of the direct investment in each of those booms was consumed, those investment sacrifices ultimately benefited profit growth across the economy and the broader equity market.
The arrival and widespread adoption of AI-related technology may prove similarly beneficial for the broader market, and that possibility is already being reflected in equity markets around the world. Not only are earnings estimates rising for U.S. companies, as might be expected, but future earnings estimates in Europe, Asia, and throughout Emerging Markets are rising rapidly as well (below, right).
The impact of rising earnings expectations is proving to be transformative for markets outside the U.S., especially for those markets which have been stagnant in recent decades. Equity markets in Japan and Europe in particular, which have declined from a combined two-thirds of global equity value to just 16% over the past forty years (above, left), have been rising strongly over the past few years. In fact, markets outside the U.S. have been rising so strongly that the U.S. share of global public equity (grey line above, left) has shrunk over the past year for the first time in almost two decades.
Because the U.S. equity market clearly represents the center of AI-related technology companies, the relatively strong performance of global markets is another example of how boom-and-bust cycles spawned by major technological innovations can unfold in the markets. While much of the risk from AI-related investments may be borne by investors directly participating in the frenzy, much of the aggregate return from the widespread adoption of AI-related technology may eventually flow to the broader global equity market, as companies become more productive over time. By maintaining a globally diversified equity portfolio, the early aggregate returns from the development and adoption of AI can be captured, without most of the risk.
* * *
While a durable regime change in the global equity market landscape is still an evolving trend, a regime change in U.S. monetary policy leadership has already been completed.
Kevin Warsh was confirmed by the Senate and later took the oath of office as Chair of the Board of Governors of the Federal Reserve System. The Federal Open Market Committee also selected him as its Chair. He replaced Jerome Powell, whose term as Chair expired in May. Powell chose to remain on the Federal Reserve Board of Governors, where his term as governor continues, making him the first former Chair since Mariner Eccles to remain on the Board after stepping down as Chair.
In testimony during his April confirmation hearing, Warsh suggested that, if confirmed, he would pursue a regime change in how the Federal Reserve conducts monetary policy. While we do not know specifically what changes Chair Warsh will pursue, or what circumstances in the years ahead will allow him to accomplish, we do know he has been a critic of the expansion of the Federal Reserve’s balance sheet in the years after the financial crisis, including the large expansion in 2020 and 2021.
Warsh has often cited the Fed’s balance sheet expansion in the decade after the financial crisis as a potential source of higher inflation, and he has specifically called the aggressive expansion in 2020 and 2021 a policy error. During his confirmation hearing, when asked how he would address the increasing cost of living experienced in the U.S. in recent years, this was Warsh’s reply:
“There’s probably no more pressing question than the cost of living. We know at the Federal Reserve that price stability was an objective that you and your colleagues gave to the Fed. So, when, over the course of the last several years, especially after COVID, when prices went up to the tune of 25% to 35% for virtually all deciles of the American people, that’s an indication that the Fed missed its mark. And we are still dealing with the legacy of the policy errors in 2021 and 2022. Once you let inflation take hold in the economy, it’s more expensive and harder to bring it down.
And so the fatal policy error going back four or five years is still a legacy that we’re dealing with. We need, in my judgment, fundamental policy reforms to fix it…I think that means a regime change in the conduct of policy. I think that means a different new inflation framework. I look forward to working with my colleagues at the Fed if confirmed to achieve that.”
The balance sheet expansion and the ultra-low interest rates in the years after the financial crisis had a significant impact on the economy and financial markets in the U.S., and that impact continues to reverberate even today. When the Federal Reserve expanded its balance sheet through purchases of Treasury and mortgage-backed securities, it helped lower foundational rates of interest below levels they likely would have been otherwise. One of the goals of that effort was to promote the recovery of the housing market, and this goal was achieved. Another goal was to prevent a “balance-sheet recession,” in which the economy falls into a deflationary trap, such as Japan experienced in the 1990s and 2000s and the U.S. experienced during the Great Depression. The goal of preventing this dire outcome was achieved as well.
At the same time, this balance sheet expansion had side effects, including increasing the potential for higher rates of inflation and reducing market incentives that might otherwise have accompanied the growth of federal debt. By suppressing rates on Treasury bills, notes, and bonds, the Federal Reserve weakened the normal feedback loop that would have made the substantial growth in federal debt more costly to legislate. As federal debt approaches $40 trillion, we are living with the cost of that monetary subsidy of fiscal policy, just as we have been living with the increased potential for higher inflation over the past few years.
Later in the same hearing, Senator Cynthia Lummis asked Warsh for his current views on the size of the Federal Reserve’s balance sheet. This is what he had to say:
“The Fed balance sheet has played a particularly, I think, unhelpful role in helping the Fed achieve its dual mandate. The Senator had just mentioned what she described as the increase for financial assets relative to real assets. Well, part of that is the Federal Reserve.
The Fed is not blameless in that as it’s grown, the Fed’s balance sheet has grown its impact on the economy. Those with financial assets have benefited from it. The reason why I prefer monetary policy to use interest rates as the dominant force is, interest rates affect a far broader cross section of the economy. Interest rates get in the cracks. If we were to cut rates, then broader number of people will benefit from it versus quantitative easing, which tends to move through financial assets first. Half of our fellow Americans don’t own any financial assets, so they’re wondering what’s in it for them…
Slowly and deliberately, I believe we need a smaller central bank balance sheet. It took us 18 years to create this big balance sheet that’s done quite a bit of harm, it strikes me, to the Fed’s credibility. Working with the Treasury secretary, we’re going to have to find a way in which we can take the balance sheet and make it smaller, because a large balance sheet where the Fed owns more outstanding debt than many parts of the financial markets, that’s fiscal policy in disguise. The Fed needs to get out of the fiscal business, focus on the monetary business, so the Fed can deliver on the mandates you gave us.”
For regular readers, the responses highlighted above by new Federal Reserve Chair Kevin Warsh will echo a familiar tone with many of the issues we have discussed over the years. The biggest question going forward is whether these sentiments guide U.S. monetary policy decisions in the years ahead, and to what extent. If the Federal Reserve were to move in the direction of shrinking its balance sheet and reducing its entanglement with fiscal policy, it would likely affect returns for stocks, bonds, and real assets. The potential for such a policy pivot following the recent regime change at the Fed warrants close observation in the years ahead.
The news over the past few months has been filled with headlines relating to the war with Iran and the rise in oil prices. A sharp rise in energy prices is not merely a story about oil, but a reminder of how quickly a shift in a key market can affect the broader economy. Such increases in energy prices seldom remain confined to the pump; in time, a significant rise in the cost of energy can be felt in transportation, production, household budgets, and borrowing costs. With those pressures comes the risk that higher inflation may prove, yet again, more persistent than expected. Five years after inflation rates above 2% were expected to be transitory, the U.S. remains on a path that bears more than a passing resemblance to the early years of the Great Inflation.
Rising debt and persistent deficit spending remain, and those forces may continue to keep inflation and interest rates higher than investors grew accustomed to in the years after the financial crisis. The fiscal deficit is also stimulating economic growth and supporting employment, which has helped prevent a recession. However, it remains to be seen how the Federal Reserve and the broader public will respond if inflation remains above 4% or rises further.
As these market dynamics unfold in the months ahead, global diversification rooted in value and balanced with real assets may help a portfolio remain prepared to respond productively to the volatility that often rules markets in the short run, while remaining sheltered from investment busts and the impacts of inflation over the long run.
* * *
The preceding is from our 2nd Quarter letter to clients. To schedule a consultation to review your portfolio, please visit Getting Started.
The content of this article is provided as general information and is for educational purposes only. It is not intended to provide investment or other advice. This material is not to be construed as a recommendation or solicitation to buy or sell any security, financial product, instrument or to participate in any particular trading strategy. Not all securities, products or services described are available in all countries, and nothing herein constitutes an offer or solicitation of any securities, products or services in any jurisdiction where their offer or sale is not qualified or exempt from registration or otherwise legally permissible.
Although the material herein is based upon information considered reliable and up-to-date, Sitka Pacific Capital Management, LLC does not assure that this material is accurate, current, or complete, and it should not be relied upon as such. Content in this article may not be copied, reproduced, republished, or posted, in whole or in part, without prior written consent — which is usually gladly given, as long as its use includes clear and proper attribution. Contact us for more information.
© Sitka Pacific Capital Management, LLC
Disruption and Regime Change
2nd Quarter, 2026
We’ve been here before. Long before ChatGPT stormed onto the scene—poised to rewrite everything from business plans to wedding vows—a different technology swept through American society like wildfire, thrilling young people and eliciting warnings of declining family values.
It’s easy to assume that today’s whirlwind of disruptive tech—robo-cars, AI, brain implants and more—is jolting American society as never before. But don’t overlook the 1920s, when the country’s rapid embrace of cars, radio, airplanes, full-length movies, in-home electricity, etc., created an equally intense sense of innovation gone wild.
~ The Wall Street Journal, May 2, 2026
We need, in my judgment, fundamental policy reforms…I think that means a regime change in the conduct of policy. I think that means a different, new inflation framework.
~ Kevin Warsh, Federal Reserve Chair Nominee, April 2026
It can be a tremendous benefit in the long run. At the same time, it can also lead to maintaining a seemingly undue amount of skepticism in the short run. Being familiar with the numerous booms and busts throughout history can result in a certain level of detachment from periods of euphoria and despair. Yet it can also underwrite a resilience through challenging market environments that leave an investor less vulnerable in periods of significant change.
Today, it would be hard to argue we are not in a period of significant change and disruption. At the same time, it would also be hard to argue that there have not been periods of change throughout history that were just as significant as the rapidly evolving landscape today, if not more so.
The arrival of AI-based technology and tools is clearly a significant economic event. However, the periods that witnessed the arrival of the telegraph, the laying of railroads, the electrification of cities, and the spread of radio, television, automobiles, and flight were also significant in their own right. Those technologies spawned tremendous investment booms, as each represented a leap in efficiency and opportunity. Yet the investment booms that accompanied them were also followed by busts, as the race for profits led to overinvestment and losses among the investments that were eventually crowded out.
It is the nature of significant technological advances to attract large sums of investment capital. It is also the nature of such investment booms, in a competitive market economy, that not all the capital invested during the rush earns the profits it seeks. One important lesson from past boom-and-bust cycles is that major technological advancements, though they may represent great leaps forward for society at large, can also create euphoric market conditions that ultimately disappoint many investors.
As shown in the chart below, the broader U.S. equity market has recently risen to a valuation similar to what was reached in 2000, at the peak of the Tech bubble. At that time, investors were euphoric over the seemingly endless profit potential the internet appeared to represent.
The sentiment then was not unlike what we have recently been witnessing in how investors are thinking about companies directly related to AI, as well as companies supplying the infrastructure. These companies, public and private, have attracted huge sums of investment capital over the past few years, all of which will compete for a share of the profit potential that AI-related technology may represent. Yet the history of past booms suggests that profit potential can ultimately prove more limited than the amount of capital raised to capture it during a boom. In such an environment, the way for investors at large to benefit from significant technological advances is not necessarily as straightforward as direct investment in the companies at the center of the frenzy.
While the railroad boom in the late 1860s and early 1870s transformed travel and commerce across the world, around a third of railroad companies went bankrupt after the Panic of 1873 ended the investment boom. Companies that survived the initial market panic endured volatility and steep drawdowns in their stock prices for years afterward, while the markets sorted out which companies would ultimately endure as going concerns. While the thousands of miles of railroad tracks laid during the boom ultimately proved transformative for the U.S. economy, many of the individual companies that built them did not last. As a result, though records from the time are incomplete, the total return for outside investors who invested directly in rail companies through the boom and bust was likely negative.
A similar process defined the emergence of the mass-produced automobiles in the 1920s. Just like the laying of railroad track, the widespread adoption of mass-produced automobiles transformed manufacturing, travel, and commerce across the U.S. Yet despite that success, investors in auto companies themselves were largely wiped out, in aggregate, during the consolidation in the 1930s: more than 90% of auto manufacturing companies disappeared between 1925 and 1935. While the surviving Big Three automakers dominated auto manufacturing after 1935 and continued to transform the U.S. economy in the subsequent decades, the aggregate return to outside investors in auto companies during the frenzy of the late 1920s was deeply negative.
The internet bubble of the 1990s is a more recent example that many investors today experienced directly. While the rapid spread of personal computing and the internet proved transformative for the U.S. and global economy, estimates suggest that around 70%-80% of outside capital invested in technology companies related to the internet during the boom evaporated during the bust. Approximately two-thirds of tech-related companies did not survive. During the recovery in the decade that followed, the technology industry consolidated in a process similar to the railroad and auto industries before it, and large winners emerged. However, the aggregate return that investors at large experienced remained negative for more than fifteen years after the bubble burst.
These examples of prior booms and busts in response to technological leaps show a clear and consistent pattern: direct investments into the center of a frenzy often attract large capital inflows, much of which is later consumed by consolidation following the boom.
What tends to be lost in the excitement surrounding companies at the center of the investment boom is the transformative impact each major technological advance can have on the broader economy. Although most individual railroad, auto manufacturing, and technology companies went under in the 1870s, 1930s, and 2000s, respectively, the arrival of rail transport, mass-produced motorized vehicles, and the internet each proved transformative for the productivity of the economy as a whole. Though much of the direct investment in each of those booms was consumed, those investment sacrifices ultimately benefited profit growth across the economy and the broader equity market.
The arrival and widespread adoption of AI-related technology may prove similarly beneficial for the broader market, and that possibility is already being reflected in equity markets around the world. Not only are earnings estimates rising for U.S. companies, as might be expected, but future earnings estimates in Europe, Asia, and throughout Emerging Markets are rising rapidly as well (below, right).
The impact of rising earnings expectations is proving to be transformative for markets outside the U.S., especially for those markets which have been stagnant in recent decades. Equity markets in Japan and Europe in particular, which have declined from a combined two-thirds of global equity value to just 16% over the past forty years (above, left), have been rising strongly over the past few years. In fact, markets outside the U.S. have been rising so strongly that the U.S. share of global public equity (grey line above, left) has shrunk over the past year for the first time in almost two decades.
Because the U.S. equity market clearly represents the center of AI-related technology companies, the relatively strong performance of global markets is another example of how boom-and-bust cycles spawned by major technological innovations can unfold in the markets. While much of the risk from AI-related investments may be borne by investors directly participating in the frenzy, much of the aggregate return from the widespread adoption of AI-related technology may eventually flow to the broader global equity market, as companies become more productive over time. By maintaining a globally diversified equity portfolio, the early aggregate returns from the development and adoption of AI can be captured, without most of the risk.
* * *
While a durable regime change in the global equity market landscape is still an evolving trend, a regime change in U.S. monetary policy leadership has already been completed.
Kevin Warsh was confirmed by the Senate and later took the oath of office as Chair of the Board of Governors of the Federal Reserve System. The Federal Open Market Committee also selected him as its Chair. He replaced Jerome Powell, whose term as Chair expired in May. Powell chose to remain on the Federal Reserve Board of Governors, where his term as governor continues, making him the first former Chair since Mariner Eccles to remain on the Board after stepping down as Chair.
In testimony during his April confirmation hearing, Warsh suggested that, if confirmed, he would pursue a regime change in how the Federal Reserve conducts monetary policy. While we do not know specifically what changes Chair Warsh will pursue, or what circumstances in the years ahead will allow him to accomplish, we do know he has been a critic of the expansion of the Federal Reserve’s balance sheet in the years after the financial crisis, including the large expansion in 2020 and 2021.
Warsh has often cited the Fed’s balance sheet expansion in the decade after the financial crisis as a potential source of higher inflation, and he has specifically called the aggressive expansion in 2020 and 2021 a policy error. During his confirmation hearing, when asked how he would address the increasing cost of living experienced in the U.S. in recent years, this was Warsh’s reply:
“There’s probably no more pressing question than the cost of living. We know at the Federal Reserve that price stability was an objective that you and your colleagues gave to the Fed. So, when, over the course of the last several years, especially after COVID, when prices went up to the tune of 25% to 35% for virtually all deciles of the American people, that’s an indication that the Fed missed its mark. And we are still dealing with the legacy of the policy errors in 2021 and 2022. Once you let inflation take hold in the economy, it’s more expensive and harder to bring it down.
And so the fatal policy error going back four or five years is still a legacy that we’re dealing with. We need, in my judgment, fundamental policy reforms to fix it…I think that means a regime change in the conduct of policy. I think that means a different new inflation framework. I look forward to working with my colleagues at the Fed if confirmed to achieve that.”
The balance sheet expansion and the ultra-low interest rates in the years after the financial crisis had a significant impact on the economy and financial markets in the U.S., and that impact continues to reverberate even today. When the Federal Reserve expanded its balance sheet through purchases of Treasury and mortgage-backed securities, it helped lower foundational rates of interest below levels they likely would have been otherwise. One of the goals of that effort was to promote the recovery of the housing market, and this goal was achieved. Another goal was to prevent a “balance-sheet recession,” in which the economy falls into a deflationary trap, such as Japan experienced in the 1990s and 2000s and the U.S. experienced during the Great Depression. The goal of preventing this dire outcome was achieved as well.
At the same time, this balance sheet expansion had side effects, including increasing the potential for higher rates of inflation and reducing market incentives that might otherwise have accompanied the growth of federal debt. By suppressing rates on Treasury bills, notes, and bonds, the Federal Reserve weakened the normal feedback loop that would have made the substantial growth in federal debt more costly to legislate. As federal debt approaches $40 trillion, we are living with the cost of that monetary subsidy of fiscal policy, just as we have been living with the increased potential for higher inflation over the past few years.
Later in the same hearing, Senator Cynthia Lummis asked Warsh for his current views on the size of the Federal Reserve’s balance sheet. This is what he had to say:
“The Fed balance sheet has played a particularly, I think, unhelpful role in helping the Fed achieve its dual mandate. The Senator had just mentioned what she described as the increase for financial assets relative to real assets. Well, part of that is the Federal Reserve.
The Fed is not blameless in that as it’s grown, the Fed’s balance sheet has grown its impact on the economy. Those with financial assets have benefited from it. The reason why I prefer monetary policy to use interest rates as the dominant force is, interest rates affect a far broader cross section of the economy. Interest rates get in the cracks. If we were to cut rates, then broader number of people will benefit from it versus quantitative easing, which tends to move through financial assets first. Half of our fellow Americans don’t own any financial assets, so they’re wondering what’s in it for them…
Slowly and deliberately, I believe we need a smaller central bank balance sheet. It took us 18 years to create this big balance sheet that’s done quite a bit of harm, it strikes me, to the Fed’s credibility. Working with the Treasury secretary, we’re going to have to find a way in which we can take the balance sheet and make it smaller, because a large balance sheet where the Fed owns more outstanding debt than many parts of the financial markets, that’s fiscal policy in disguise. The Fed needs to get out of the fiscal business, focus on the monetary business, so the Fed can deliver on the mandates you gave us.”
For regular readers, the responses highlighted above by new Federal Reserve Chair Kevin Warsh will echo a familiar tone with many of the issues we have discussed over the years. The biggest question going forward is whether these sentiments guide U.S. monetary policy decisions in the years ahead, and to what extent. If the Federal Reserve were to move in the direction of shrinking its balance sheet and reducing its entanglement with fiscal policy, it would likely affect returns for stocks, bonds, and real assets. The potential for such a policy pivot following the recent regime change at the Fed warrants close observation in the years ahead.
The news over the past few months has been filled with headlines relating to the war with Iran and the rise in oil prices. A sharp rise in energy prices is not merely a story about oil, but a reminder of how quickly a shift in a key market can affect the broader economy. Such increases in energy prices seldom remain confined to the pump; in time, a significant rise in the cost of energy can be felt in transportation, production, household budgets, and borrowing costs. With those pressures comes the risk that higher inflation may prove, yet again, more persistent than expected. Five years after inflation rates above 2% were expected to be transitory, the U.S. remains on a path that bears more than a passing resemblance to the early years of the Great Inflation.
Rising debt and persistent deficit spending remain, and those forces may continue to keep inflation and interest rates higher than investors grew accustomed to in the years after the financial crisis. The fiscal deficit is also stimulating economic growth and supporting employment, which has helped prevent a recession. However, it remains to be seen how the Federal Reserve and the broader public will respond if inflation remains above 4% or rises further.
As these market dynamics unfold in the months ahead, global diversification rooted in value and balanced with real assets may help a portfolio remain prepared to respond productively to the volatility that often rules markets in the short run, while remaining sheltered from investment busts and the impacts of inflation over the long run.
* * *
The preceding is from our 2nd Quarter letter to clients. To schedule a consultation to review your portfolio, please visit Getting Started.
The content of this article is provided as general information and is for educational purposes only. It is not intended to provide investment or other advice. This material is not to be construed as a recommendation or solicitation to buy or sell any security, financial product, instrument or to participate in any particular trading strategy. Not all securities, products or services described are available in all countries, and nothing herein constitutes an offer or solicitation of any securities, products or services in any jurisdiction where their offer or sale is not qualified or exempt from registration or otherwise legally permissible.
Although the material herein is based upon information considered reliable and up-to-date, Sitka Pacific Capital Management, LLC does not assure that this material is accurate, current, or complete, and it should not be relied upon as such. Content in this article may not be copied, reproduced, republished, or posted, in whole or in part, without prior written consent — which is usually gladly given, as long as its use includes clear and proper attribution. Contact us for more information.
© Sitka Pacific Capital Management, LLC
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