Astoria has been quite vocal about using cyclical and inflation sensitive assets to provide protection for one’s portfolio. Over the past 10 years, global economies have been mired in a deflationary and low interest rate environment.
We think fundamentally this has now changed due to COVID which did 3 crucial things:
Broke supply chains and forced the cost of goods/services to skyrocket
Introduced fiscal stimulus, given monetary policy was no longer an effective means to stimulate growth
Governments were forced to "do whatever it takes" to get their COVID depressed economies out of a recession
These 3 items were a massive shift from the prior cycle. At Astoria, we believe we are in the early stages of the inflation cycle. Many cyclically oriented ETFs are still trading single digit PE ratios. While markets were obsessed with buying momentum, high multiple, unprofitable growth stocks over the past cycle, we think the next cycle will be rooted in buying cyclically oriented and inflation sensitive assets.
Just remember, nothing goes up forever. The way to make money is to buy low and sell high. Ironically investors want to buy high and think they can sell higher. Inflation and cyclical assets are still at pretty low valuation levels which makes them very attractive in our view.