We Have War, Pestilence, Famine, And Plague

To start with a quote for a change, Vladimir Lenin said: “There are decades where nothing happens, and there are weeks where decades happen.”

A lot happened this quarter, culminating in an unexpected bout of violence, which frankly, we thought society had evolved beyond and we would not witness again in our lifetimes. Millions are focused on analyzing what Will Smith did.

We joke, of course. But if you look at everything happening in the world, it would just be pure tears without a little humor. Russia invaded Ukraine and we have war, pestilence, famine and plague. There is a decent risk that Pax Americana has come to an end, along with the 13-year-old bull market.

The common refrain about COVID was that it sped up changes and trends that were already happening. We believe the same is true of the war. Inflation, supply chain problems, and shortages of energy, food, raw materials and labor were already issues that the war has now accelerated. Stocks had already begun to decline as well.

There is some evidence that inflation is destroying demand, which is slowing the economy. For many, paying higher prices for food, gas and rent means fewer resources for discretionary purchases. The question isn’t whether the Federal Reserve will cause demand destruction and a recession; inflation is likely to do that all by itself. And while government policy is not responsible for every supply chain disruption, extremely aggressive monetary and fiscal policies have facilitated embedded inflation.


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