Types of federal monetary policy environment
- Expansive
- Indeterminate
- Restrictive
Expansive monetary policy
- Small cap companies benefits by gaining easier access to credit for expansion
- Mortgage REITs experience lower interest rate expenses and improved profit margin
- cyclical sectors will tend to outperform during this period – tends to have high beta
- autos
- construction
- manufacturing
- technology
Restrictive monetary policy
- Small cap companies will experience more difficulties raising capital to fund expansion as compared to blue chip companies
- Equity REITs will outperform Mortgage REITs during this period
- Commodities will out perform in a restrictive monetary policy environment aimed at curbing inflation – especially industrial metals
Consistent performance across all monetary policy environment
Tends to have low beta
- energy
- utilities
- food
- financing
- consumer goods
Stages of business cycles
- Early stages
- Late stages
Early stage of business cycle
- Technology and transportation will outperform
Late stage of business cycle
- Consumer staples and energy will outperform
International strategies
- Scandinavian countries have the least correlation against US economy
- Scandinavian countries has the least amount of debt to GDP versus
- US
- other European countries
- Scandinavia countries have a higher savings rate
