Higher levels of economic activity are something every investor should want to get in front of and we have positioned our portfolio accordingly. Our homebuilders have direct leverage to this, as do our financials. The unleashing of the “animal spirits” and multiplier-effect that follow could positively impact our retailers and media companies to outfit and entertain the humans that live under these new roofs.
The economy needs a little price-induced paranoia in its life to grow. Inflation is a useful tool that drives action and spurs optimism/growth and currently sits at the lower bounds of historical norms. We like to wonder about the positive effects of reverting closer to long-term averages and what this means for our companies. We believe this is a when, not an if question and stand well prepared for it.
1Source: Bloomberg
Tony Scherrer is the director of research at Smead Capital Management.