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.
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