Mike Lambrechts

In March of this year, I published a cautionary piece for investors and consumers. It can be found on our website by visiting this link: https://lauderdaleadvisors.com/the-reality-of-where-we-are/. My concern was a Federal Reserve that was way behind, analysts and economists were way too bullish, and a consumer that was outspending its means, even in a strong economy. I had taken a very defensive posture for clients, our quants were some or all cash, short term Treasurys, or cash equivalents, and our hedge strategies had really begun to see their underlying protections grow in value. We’ve seen bonds continue to plummet as rates rise, a yield curve inversion (and another one today), and a Fed that has finally decided that it was wrong all along.

When I first began developing these pieces, the purpose behind developing a vision for them was to deliver a concise, no-nonsense article for clients and followers to receive my perspective without the typical fluff that we see time and again in other publications. I named this concept Keeping it “Reel” as I liked the fishing pun, but also the meaning behind it. Today I intend to communicate where my thoughts are at with the environment that we have found ourselves in.

I’ve said time and again that one of the biggest near- and long-term risks to an expensive growth sector is interest rates. When the candy is taken from the baby, we should expect to hear some crying. Over the last couple weeks, growth stocks (mostly tech) have been weeping, and we see it as a proper reaction to the swift rise in longer interest rates (10+ year Treasurys). With the irrational exuberance in the markets most obviously depicted by novice traders taking advice from Reddit posters, numerous SPAC (special purpose acquisition company) IPOs, extreme equity valuations, we felt the time was right for things to take a breather. Unbeknownst to many new retail traders driving this sentiment, trees do not grow to the sky.