The mark of a true statesman (really, of any leader) is magnanimity combined with moderation, justice, courage, foresight, prudence, a genuine concern for the public good, and temperance. Which of these features should be part of our institutions (government, legislative, judicial, military, social, etc.), including the markets? Could the markets function efficiently without temperance? Can investment decisions be made without foresight and judgment? Is the bursting of bubbles the market’s way of applying justice and fairness to extremities that distort the price discovery mechanism? What have we learned in the last couple of weeks that could enlighten our assessment regarding the markets’ trajectory? 

The following figure gives us a good historical perspective:

Here are some facts that could help us cancel the noise which surrounds our business lives:

• The New Orders Index has been softening. This is mixed news: It implies lessened price pressures but also raises concerns related to growth.
• Manufacturing PMIs still indicate economic expansion.
• Inflationary pressures in the US and the EU remain elevated. However, there are valid indications pointing to a slowdown in the rate of price increases (disinflation).
• The uncertainty of where the combination of inflation and recession will land makes prognosticating market bottoms almost impossible under the current circumstances, especially if a downward adjustment is made to expected earnings.
• The fact that both equities and bonds posted significant losses is indicative of a changing landscape (similar to 1981 and 2008).
• Building up ammunition by raising cash and taking defensive positions (such as consumer staples) might be prudent.
• Energy prices have been losing some steam in the last couple of weeks, but still remain part of a value proposition.
• Crypto’s performance may reserve more surprises, especially when we have witnessed price fluctuations from $116 to $0.008 (Luna).
• The developments around Kaliningrad and Lithuania are not encouraging. The probability of an extended and wider conflict in Europe is rising.
• The declining trajectory of civility (with economic uncertainty possibly contributing to it) and the rising levels of stupidity  is a reflection of paideia’s degradation and it might not be a bad idea to start thinking of the consequences that devolution, disintegration, and disorder could have in the medium term for political, social, and geopolitical stability.     

And because we cannot be sustained by bread alone:

“Let us hope, rather, that by the best cultivation of the physical world, beneath and around us, and the intellectual and moral world within us, we shall secure an individual, social, and political prosperity and happiness, whose course shall be onward and upward, and which, while the earth endures, shall not pass away”

                  Abraham Lincoln, Address to the Wisconsin State Agricultural Society, September 30, 1859