Q2 2021 – Annandale Capital Quarterly Commentary

The market’s views on inflation have a direct bearing on the direction of interest rates, and interest rates have a direct bearing on, well, everything. For years, the market has been able to blissfully ignore the topic of inflation because no matter what policymakers did, inflation continuously proved elusive. Recent data points, like June’s CPI reading of 5.4%, suggest we may be embarking upon a new era and the potential for a regime change has become one of the most hotly debated topics on Wall Street. On a more personal note, the relative performance of our portfolio has become highly correlated to changes in inflation expectations. When inflation worries grow, we seem to do quite well and when they dissipate, we seem to underperform.  This is not by design, but there is a logical narrative as to why our portfolio is behaving in this manner. In this commentary, we will explore the inflation debate, discuss its potential consequences, and address some of the misconceptions surrounding the topic.   Download Q2 2021 Commentary