Insights and Observations

We continue to share a collection of charts that we hope you find relevant in understanding the
current investment climate. This month’s Chartbook explores what impact the election will have on
interest rates and stocks. Another massive aid package is coming now that the election is over which
will add to this year’s record deficit and drive the National Debt further into the red. Additionally, new
policies and regulations may result in higher inflation. What impact will all this have on interest rates
and stocks?

This month’s Chartbook shows the following:

• Our government stepped in with immense aid packages due to the COVID-19 pandemic and
  lockdown. This resulted in enormous Federal Deficit spending.
  Economic activity is struggling to recover in the face of continuing personal concern and
  lockdowns.
• Both interest rates and inflation continue to hold at extremely low levels.
  There remains a substantial gap between Growth and Value stock performance.
  The concern is: Do massive cash injections from Federal borrowing ignite inflationary expectations,
  driving interest rates higher?
• If so, will inflationary expectations and the resulting higher interest rates boost Value stocks due to a
  higher discount rate weighing on the value of Growth stock’s future earning? Do higher commodity
  prices boost Value stock’s earnings? (see September Chartbook: Growth vs. Value)
  Only time will tell.

As always, know what you own, do not overinvest, and stick with quality.

-Cliff Jarvis

Download the November Chartbook: November Chartbook.. Federal Debt, Interest Rates, and Stocks