FedEx withdrew guidance overnight, causing much consternation amongst commentators given that FedEx is usually a bellweather for the economy.

The issue, however, with looking knowingly at FedEx in the current environment is that it is what’s supposed to happen, the explicit aim of current policy.

We can’t know if it is all overcooked, until it is too late, which is a simple way of saying “we won’t know if it is a policy mistake until it is obvious to all”.

Which is why we are trying to buy equities that are out of favour (like the EU or Japan) or buying international equities more broadly on big day/week/month dislocations, and trimming them when they rally too hard into a risk event (like Australia), to compensate us for this uncertainty.

Said slightly differently, buying European equities at a PE of 10x compensates you for the global impact of overly tight US monetary policy, as does having a sizeable allocation to alternative strategies, that aren’t correlated to US monetary policy, or to Australian Government Bonds, where, in the short run they feel the pain from rising rates, but over the broader run, provide insulation in case the policy mistakes in the US (and to a lesser extent that of the ECB or RBA) turn out to be well-founded.

Important Information: This document has been prepared by Aequitas Investment Partners ABN 92 644 165 266 (“Aequitas”, “our”, “we”), a Corporate Authorised Representative (no. 1284389) of C2 Financial Services, (Australian Financial Services Licensee no. 502171), and is for distribution within Australia to wholesale clients and financial advisers only.

This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.

Please note that past performance is not a reliable indicator of future performance.

General Advice Warning: This document has been prepared without taking into account your objectives, financial situation or needs, and therefore you should consider its appropriateness, having regard to your objectives, financial situation and needs. Before making any decision about whether to acquire a financial product, you should obtain and read the relevant Product Disclosure Statement (PDS) or Investor Directed Portfolio Service Guide (IDPS Guide) and consider talking to a financial adviser.

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