The Federal Reserve, as predicted, raised interest rates by 0.25%. During the following press conference, Chair Jerome Powell stated that the economy has begun to experience disinflation (slowing inflation) which means he has an internet connection and can access public information.

During the press conference, Powell made a point of not making a point, basically giving listeners both sides of the argument and letting us know clearly that he has no clarity about the future.

In response to his lack of hawkishness, markets rejoiced and tech in particular was up big after being down earlier in the trading day.

PIF’s growth portfolio was up close to 4% yesterday alone and is so far up 51.56% since the start of the year.

As I previously discussed with PIF members during our most recent live meeting, predicting the future of the macroeconomy is a challenging task given the conflicting dynamics at play. The potential reactions of policymakers to new events only add to this uncertainty.

Risk of Recession

The Conference Board Leading Economic Index is an American economic leading indicator intended to forecast future economic activity. It is calculated by The Conference Board, a non-governmental organization, which determines the value of the index from the values of ten key variables. 

Over the last 50+ years, every time the YoY series of this index prints in negative territory for 2+ consecutive months a recession happened.

July and August of 2022 had negative YOY prints which, based on historical precedent, suggests a recession in Q2 and Q3 of this year.

What we’re doing

In anticipation of harder economic times, we are positioning our portfolio to focus on higher profit margin companies with strong cash flows and will decrease exposure to higher risk names that may benefit from current market momentum but have weaker balance sheets compared to the rest of our holdings.

Alhamdulillah for what we’ve been able to accomplish so far. I remain confident in our ability to reach our 30% annualized return insha Allah.

Onwards.

Rakaan

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