Monetary Exuberance – Earnings: NWX, KBL, PBH, GRT

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Financial markets are in a monetary tightening phase, for how long depends on how quickly central banks can bring inflation under control. By early indications the economic data is beginning to slow rather quickly.

Markets are cheapening as central banks begin to raise interest rates, including guidance for more of the same going forwards. This guidance intensifies the impact of the higher interest rate policies, as further potential rate increases are then built into prices. There is almost a sense of panic coming from central banks. This is the style of rhetoric that moves markets to underpricing and more attractive values. For investors, if not liquid enough to add positions, dividends from most all the high quality names will provide solace in the interim. Fed spokespeople are talking about it taking 2 years to bring inflation under control, at today's pace of change it could take much less time.

Even the Swiss central bank raised interest rates last week. A surprise move for the first time in 15 years. Their benchmark rate rose from -0.75% to -0.25%. The rate remains ultra-low to minimize appreciation of the Swiss Franc. When there is global cooperation, as central banks are doing now, it can hasten the results.

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