The perfect storm?

"Die Hard". Despite interest rate hikes, inflation doesn't seem to want to let up. The latest inflation data has just been released and while it is 8.2% year-over-year lower than last month's 8.3%, it is still inexplicably high. Looking at month-over-month inflation, it was up 0.4 in September.

That is why financial markets are nervous…extremely nervous as Wall Street closed lower yesterday.?

Will the Fed's very likely new interest rate hike result in a recession? According to Biden, there will be no such recession in the future. Others believe yes, but the question is when? According to JPMorgan's CEO, the United States will enter a recession in the next six to nine months.

Ray Dalio considers the situation to be far more serious. He talks about a "perfect storm" in which rising interest rates, high levels of debt, the political crisis between Democrats and Republicans, and the war in Ukraine all add up to a triad of problems that are hard to solve at the same time. In other words, the state budget is being squeezed by the war, internal political strife, and the need to cut spending and reduce inflation. Dalio believes that inflation could reach 5%, but only at a 4.5% interest rate.

The Fed, it is feared, will become out of control. Because the Fed is part of the economic policy that has led us here: "stupidly low" interest rates (Ray Dalio), a massive injection of liquidity into the economy during the COVID-19 era, and so on. The government and the FED unintentionally created a post-pandemic "bubble”, and by attempting to stop the bubble with interest rate hikes and blindfolds, Jerome Powell is more likely to miss the pi?ata and instead break the economic glass table and nail us with a recession. The minutes of the Fed's September meeting, released yesterday, show that central bankers are still concerned about the durability of inflation. Many officials at the meeting emphasized that the cost of taking too little action likely outweighed the cost of taking too much action, a message that Powell has emphasized this summer.

The International Monetary Fund is not hopeful. According to a recent report, global annual growth is expected to fall from 6% in 2021 to 3.2% in 2022 and 2.7% in 2023. Global growth has been at its lowest since 2001 (except for the real estate bubble and the COVID-19 years).

And markets, such as gold, are becoming unpredictable. Usually, when there is inflation or political or economic uncertainty, traders look to gold as a safe haven. This drives up both demand and the price. Gold's price has fallen since the March increase. Prices have not risen in the last week, and if they have fallen, they have done so only slightly. What is going on? The answer lies in treasury yields. Gold competes with treasury bonds as an economic safe haven, and because bonds generate interest, gold loses out.

What about crypto? It's neither going up nor down, especially since BTC/USD is still hovering around its equilibrium value of around USD 19,000/BTC. It has done nothing but fall in the last week. What does this mean? It means that BTC is moving in lockstep with the rest of the markets. The belief that Bitcoin was a gold substitute is starting to erode.

And when will the housing market crash? We mentioned last week that this was one of the most popular questions on Google in recent months demonstrating the public's fear the words "crisis" and "real estate market" continue to elicit. The answer: The real estate market will not crash because it does not have any structural problems.?

Obviously, not everything is as it appears. Particularly for family home builders as housing prices are expected to fall by 5 to 10% in the future…another topic that we discussed last week.

It's also not a good idea to say, "I told you so”. However, as we predicted, this is all good for the multifamily solutions real estate market where rent, the economic driver of multifamily developments, is continuing to rise. Rent will eventually continue to rise over the next three to five years.?

Our take: recessions and crises are natural parts of the economic cycle, and a good investment manager or investor should be aware of this, just as a ship's captain is aware of storms on the high seas. Nothing that is happening should scare us. On the contrary, it should raise our awareness. However, we believe that two difficult years are ahead, followed by a return to sustained growth.

Now is the time to invest as a good investor. What’s most important now is where. What asset classes? There are some assets that are more volatile than others, meaning they are more susceptible to day-to-day winds. In rough seas, it’s critical to seek refuge in assets that do not rock too much.