Three Minute Digest for April 14, 2022

April 21, 2022

The brutal Russian Invasion of Ukraine has devasted millions of lives as well as the infrastructure of a land rich in natural resources and central to the economic health of Europe. Here in the United States, the markets face challenges with inflation data rising steadily for fourteen months and topping 40-year highs for the last four months. Discussions of recession are increasing, and we believe the term “stagflation” will soon be a topic for discussion.

Affinity Capital exited our positions in international markets in January and international emerging markets at the end of last year. We stated our belief that Russia would not move on Ukraine until after the Olympics as a gesture to Olympic host China. The 2022 Olympics ended on February 20 th and Russia Invaded on February 24 th .

In our January 26th Digest, we stated, “Mixed signals abound within the question of whether Russia will make advances on Ukraine. ….. vast energy, mining, and agricultural resources. Disruption of these industries through further sanctions or military conflict would have serious repercussions for world markets. ”  The question is whether there will be a high enough level of economic turmoil to propel Europe into recession. Fourteen percent of revenue from the 500 U.S. companies in the S&P 500 come from Europe and dominoes could fall our way and further slow U.S economic growth.

Recession Defined

A recession is defined as a significant decline in economic activity that lasts for multiple calendar quarters or even years. This includes rising levels of unemployment, falling retail sales, and lower levels of income and manufacturing. We do note that mild recessions are a normal part of the business cycle however our concern is when recessionary measures become extreme.

Inflation Defined

Inflation is a sustained rise in the cost of goods and services in an economy when the cost of energy, food, and most other goods and services rise faster than wages. A little inflation is a normal part of the business cycle, but a lot of inflation is obviously not favorable. As mentioned above, inflation data has been rising steadily for fourteen months and topping 40-year highs for the last four months. The Federal Reserve has kept interest rates excessively low since the 2008 mortgage crisis and our view is that they are behind the curve in managing interest rates. The rapid closing and opening of our economies due to COVID plus ongoing supply chain issues, energy policies exacerbated by Russia’s brutal war and trillions of dollars of government spending have all played a part in where we find ourselves today.

Stagflation Explained

Stagflation is an economic situation in which the inflation rate is high and economic growth rates are low - recession combined with inflation.

Where We Are Now

Good question! That is what the markets are trying to predict and why they are so volatile right now. Our view is that inflation, which drives higher interest rates, is the main concern for our portfolios. We have seen indicators that signal recession, but these signals can lead a recession by 12 to 24 months. As of now, we do see slower growth this year, but cautiously do not see clear indicators of a recession in 2022. As the markets enter the period where corporate America will announce their first quarter earnings, we anticipate reasonable earnings announcements but are extremely cautious on the market reactions to the statements companies will make as to future earnings projections. We expect these to be less optimistic in most sectors.

As always, please feel free to call with any questions. We appreciate your business.

Markets, Geopolitics, and Recent Volatility

January 21, 2026
Recent market headlines have been driven less by economic data and more by geopolitics. In particular, renewed discussion around Greenland and its strategic importance has introduced a new layer of uncertainty into global markets. Greenland matters not because of its size or population, but because of its location and resources. It sits at a critical crossroads between North America and Europe, plays an increasingly important role in Arctic shipping routes, and holds significant reserves of rare earth minerals that are essential for technology, defense systems, and energy infrastructure. As global competition for these resources intensifies, Greenland has become a focal point in broader strategic and trade discussions. Markets reacted quickly to this uncertainty. U.S. stock indexes moved lower in a broad selloff, with technology shares leading the decline. At the same time, investors shifted toward more defensive assets, pushing volatility higher, lifting gold prices, and pressuring risk-oriented assets such as cryptocurrencies. Similar caution was reflected in overseas markets as well. When geopolitical issues intersect with trade policy, markets tend to respond swiftly. Even the possibility of changes in tariffs, trade relationships, or diplomatic alignment can influence assumptions about global supply chains, corporate earnings, and economic growth. That is what markets have been digesting. These developments are now a regular part of the global environment. Markets today must absorb not only interest rates and earnings reports, but also geopolitical strategy, resource security, and shifting alliances. This can create short-term market adjustments as investors reassess expectations. Geopolitical uncertainty does not automatically translate into lasting economic damage. Markets have navigated trade disputes, diplomatic standoffs, and strategic realignments many times before. Over time, clarity emerges, negotiations evolve, and economic activity adapts. We continue to watch these developments closely and view them as part of the broader global backdrop in which markets operate. While the headlines may feel new, the underlying dynamic of markets responding to geopolitical uncertainty is familiar and expected. If you have questions about how global events fit into the bigger picture, we are always available to talk them through. Understanding the context behind the headlines is often the most effective way to stay grounded when markets react to evolving global issues.

The Policy Pivot: Key Takeaways for Investors

December 11, 2025
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Finishing 2025 Strong: Key Trends to Watch

December 1, 2025
As we move into the final month of 2025, markets are adjusting to a new mix of encouraging economic trends and lingering uncertainty. November ended on a softer note, but December has opened with improved sentiment, clearer expectations around Federal Reserve policy, and a more confident tone in both equity and fixed income markets. Investors are watching these shifts closely, and the weeks ahead will help determine how the year ultimately finishes. At Affinity Capital, we continue to see an environment supported by quality leadership, steady earnings, and more attractive income opportunities. At the same time, late-cycle pressures and uneven economic data remind us that thoughtful risk management remains essential. A More Constructive Tone to Start December December began on firmer footing after several weeks of mixed performance. The most significant driver has been the market’s growing conviction that the Federal Reserve is getting closer to the start of a rate-cutting cycle. Current pricing suggests a meaningful chance of a cut in the near term, which has helped lift sentiment across equities and high-quality bonds. This optimism has also supported areas that tend to benefit from lower yield expectations, such as precious metals and rate-sensitive parts of the market. While not a guarantee of what comes next, the shift toward more accommodative policy expectations has created a more balanced backdrop than we saw earlier in the fall. Economic Data Remains Mixed Despite the improved tone, the incoming data continues to show pockets of weakness. Manufacturing activity has contracted for another month, hiring momentum has slowed, and consumer spending has moderated from its pace earlier in the year. The recent government shutdown delayed several economic releases, and the catch-up process has added some short-term noise to the data stream. What stands out is the contrast between a resilient corporate earnings picture and a softer macro environment. Many large companies continue to report healthy margins and steady demand, yet the broader economic indicators suggest that growth is losing some steam. This type of divergence is typical in late-cycle phases and often results in more frequent market swings. Volatility Has Picked Up After months of historically low volatility, markets have begun to experience more frequent fluctuations. Concerns around artificial intelligence valuations, regional banking stress, and geopolitical developments have all played a role. Volatility is not necessarily a sign of structural weakness, but it is a reminder that investors should expect a less predictable finish to the year. For diversified portfolios, these swings can create opportunities to rebalance, harvest gains, or add exposure to areas that have repriced more attractively. They also highlight the importance of high-quality holdings that can withstand periods of uncertainty. Opportunities Across Equities and Fixed Income Even with the mixed data backdrop, the overall investment environment remains constructive for long-term investors. High-quality U.S. companies with strong balance sheets and consistent earnings continue to provide stability at the core of portfolios. Select small-cap and mid-cap companies have also begun to show signs of improvement as rate expectations shift. In fixed income, today’s yields offer significantly more value than they did for much of the past decade. Bonds once again contribute meaningful income, and the possibility of lower rates in 2026 creates potential for price appreciation in high-grade credit. This combination strengthens the case for balanced portfolios that include both equities and fixed income. Positioning Into Year-End Given the current landscape, we believe the market is moving toward a finish that is neither overly exuberant nor overly cautious. Several key themes are likely to guide performance over the coming weeks. Quality leadership continues to play an important role, especially in sectors tied to innovation, cloud infrastructure, and digital transformation Broad market exposure remains valuable in capturing the benefits of seasonal strength and earnings resilience Dividend-oriented and defensive holdings support stability in late-cycle environments High-quality bonds offer attractive income and diversification benefits Small-cap and mid-cap allocations may provide long-term upside as rate expectations shift Looking Ahead As the year comes to a close, investors are balancing two realities. On one side, there is growing optimism around potential rate cuts, resilient corporate earnings, and improving seasonal patterns. On the other side, there are signs of slowing economic momentum, higher volatility, and continued geopolitical uncertainty. The result is a market that rewards discipline, diversification, and a focus on long-term goals. At Affinity Capital, our approach remains steady. We continue to emphasize high-quality holdings, balanced allocations, and thoughtful adjustments based on data rather than emotion. The coming months will bring new information, but the principles that guide long-term success remain unchanged. We are here to help clients stay aligned with their plans and positioned with confidence as we move into a new year.