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Craig Callahan, DBA
Founder & CEO

  • Portfolio Manager and Chairman of the ICON Investment Committee
  • Created ICON’s proprietary valuation model
  • Founded ICON in 1986

Bloomberg Forecasting Survery

Dr. Craig Callahan, ICON Advisers – Founder & President

February, 2022

For forty years, since the early 1980s, investors have worried about inflation coming back and they’ve been wrong with their fears unfounded the whole time.  Now with the CPI up 7% over 12-months, their fears are once again ignited!

ICON has always made a distinction between inflation and a one-time price increase. Inflation is a compounding of price increases and I don’t believe the one-time price increases of 2021 have the ability to compound.  That is, I don’t think those who raised prices in 2021 have the ability to raise them again.   Here is a survey of economists on Bloomberg showing Y-O-Y Consumer Price Index (CPI) forecasts quarterly through the second quarter of 2023.  Notice it is diminishing.

I agree with the survey and think it is sensible.

Unlike the economists, stock investors believe inflation is persistent and believe the Fed will have to tighten so much that the result would send the economy into recession – I don’t.

What if T-Bills were at 1.0% and the 10 year Treasury was at 2.0%?  Would the economy come to a halt?

What if T-Bills were 1.50% and the 10 year was at 2.50%, and let’s say Money Supply (M1) is growing at its historic average of about 6% per year instead of the 16% we saw in 2021?  By historic standards such a setting is not very scary.  Businesses can do just fine in that setting.

Recall our ICON Value and Sentiment graphic.  We don’t need the economic setting to be perfect for the market to move higher.  We just need it to be better than is currently priced in.  Currently, investors are pricing in strong inflation and severe Fed tightening.

If we get anything better than that scenario, stocks can move higher.

More from Dr. Craig Callahan

For more in depth discussions on Inflation and the Federal Reserve, you can read Dr. Callahan’s book titled “Unloved Bull Markets: Getting Rich the Easy Way by Riding Bull Markets.”

The data quoted represents past performance, which is no guarantee of future results. Investing in securities involves inherent risks, including the risk that you can lose the value of your investment. There is no assurance that the investment process will consistently lead to successful results. Index performance shown above is not representative of any ICON Funds product or service.

Opinions and forecasts regarding industries, companies and/or themes and portfolio composition and holdings are all subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security, industry or sector.

Investing in securities involves risks. There is no assurance that the investment process will consistently lead to successful results.

ICON’s value-based investing model is an analytical, quantitative approach to investing that employs various factors, including projected earnings growth estimates and bond yields, in an effort to determine whether securities are over- or underpriced relative to ICON’s estimates of their intrinsic value. ICON’s value approach involves forward-looking statements and assumptions based on judgments and projections that are neither predictive nor guarantees of future results. Value readings are contingent on several variables including, without limitation, earnings, growth estimates, interest rates and overall market conditions. Although valuation readings serve as guidelines for our investment decisions, we retain the discretion to buy and sell securities that fall beyond these guidelines as needed. Value investing involves risks and uncertainties and does not guarantee better performance or lower costs than other investment methodologies.

ICON’s value-to-price ratio is a ratio of the intrinsic value, as calculated using ICON’s proprietary valuation methodology, of a broad range of domestic and international securities within ICON’s system as compared to the current market price of those securities. According to our methodology, a V/P reading of 1.00 indicates stocks are priced at intrinsic value. We believe stocks with a V/P reading below 1.00 are overvalued while stocks with a V/P reading above 1.00 are undervalued. For example, we interpret a V/P reading of 1.15 to mean that for every $1.00 of market value, there is $1.15 of intrinsic value which has not yet been realized in the market price.

The unmanaged Standard & Poor’s (S&P) 500 Index is a market value-weighted index of large-cap common stocks considered representative of the broad market. Total return for the unmanaged index includes the reinvestment of dividends and capital gain distributions but do not reflect deductions for commissions, management fees, and expenses. Individuals cannot invest directly in an index.

The 10-year yield is the benchmark 10-year yield to maturity reflected by the current issue 10 year U.S. Treasury note.

A Treasury bill (T-Bill) is a short-term debt obligation backed by the Treasury Dept. of the U.S. government with a maturity of less than one year.

The Consumer Price Index (CPI) is a measure of the average change in prices over time of goods and services purchased by households.  The CPIs are based on prices of food, clothing, shelter, fuels, transportation fares, charges for doctors’ and dentists’ services, drugs, and other goods and services that people buy for day-to-day living.

Please visit ICON online at www.ICONAdvisers.com or call 1-800-828-4881 for the most recent copy of ICON’s Form ADV, Part 2.

ICON Blogs

  • Bloomberg SurveryMarch 16, 2022 - 2:17 pm
  • The Fed, Rates, and ValueMarch 16, 2022 - 12:23 pm
  • Do-Low-Bullish-Reading-Signal-a-Potential-Rally?February 10, 2022 - 10:44 am
  • Don’t Fight the FedJanuary 7, 2021 - 12:48 pm
  • Why Claims that “The Market Was Expensive” Were WrongJanuary 7, 2021 - 12:44 pm

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8480 E Orchard Road, Suite 1200
Greenwood Village, CO 80111

1-800-828-4881

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Investing in securities involves inherent risks, including the risk that you can lose the value of your investment. There is no assurance that the investment process will consistently lead to successful results.

Consider the investment objectives, risks, charges, expenses, and share classes of each ICON Fund carefully before investing. The prospectus contains this and other information about the Funds; please read the prospectus carefully before investing. RFS Partners, Distributor.

ICON Funds are offered only to U.S. citizens or residents of the U.S., and the information on this website is intended only for such persons. Nothing on this website should be considered a solicitation to buy or an offer to sell shares of any ICON Fund in any jurisdiction where the offer or solicitation would be unlawful under the securities laws of such jurisdiction.

ICON Advisers, Inc. is the sub-adviser to the ICON Funds. RFS Partners is the distributor of the ICON Funds.  

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