FMT’s goal is to always put the important pieces of an ever-changing world together to bring you the big picture, and the big picture is that we have entered a long-term stagflationary trend.
To be considered a major trend, it needs to have been in motion for a minimum of six months. FMT estimates that the stagflationary trend we have entered started in late November 2021, which is the date both interest rates and energy prices started to skyrocket.
The world has fundamentally changed, and FMT estimates this major overall trend will persist through at least 2026.
Consistent with stagflation, the Federal Funds Rate is 7% below the real rate of inflation, and at no point in U.S. history has the Federal Reserve lagged inflation rates by as much.
Such low rates in comparison to inflation rates will cause a lot a volatility as the Fed tries to rein in inflation, but the Federal Reserve will ultimately keep interest rates below the real rates of inflation because of government debt for most or all of this decade.
With an energy crisis that is worse than the 1970s (please read our Energy report), and an impossible task for the Fed to raise rates above the rate of inflation, FMT estimates the United States will be in a period of persistent stagflation that will rival and surpass the 1970s for quite some time.
Being a money management company that can capitalize on major money trends no matter what they might entail, we can count ourselves advantaged and fortuitous.
Of course, in any long-term trend, there are plenty of counter-trend rallies in the short to intermediate-term that can confuse market participants about the major underlying trend in place.
In that regard, it is important to stay focused on the big picture (a stagflationary trend), yet also remain disciplined regarding valuations and be flexible with short and longer-term market structures when necessary.
The long-term market structures that FMT has isolated as sweet spots for the major stagflationary trend, which have strong fundamental drivers at least through 2025, are:
- Long gold/short a major financial index
- Attractively priced oil and natural gas companies
- Uranium / producers
- Copper / royalty and producer companies
- Iron ore (global)
- Silver / producers
- Value stocks
- Bitcoin (explosive when the Fed pauses)
Those are the major themes and/or investments FMT will be hitting on over the next few years.
All these fundamental themes have a variety of different characteristics and diversification opportunities, and we’ll seek the best risk-adjusted bets as we go through this long-term stagflationary trend.
Stay tuned as FMT drills down on these individual themes more narrowly in future communications, especially since we have a lot of cash to deploy!