If inflation does not fall precipitously as expected, he noted, monetary policy will "remain tighter for longer, impacting valuations across all asset classes."
Mr. Rosen also said the risks for a recession in the U.S. remain "higher than normal," given the inverted yield, the decline in some leading economic indicators, the slump in manufacturing order and the fall in housing activity. "But there remains strong demand for labor, nominal wages are rising — although real, inflation-adjusted wages are not rising — and the U.S. may skirt a recession this year that seemed more likely a few months ago," he said.
In contrast, he noted, recession risks in Europe and Asia have eased, citing some "hopeful economic signals" over the past few months.
"Warm (winter) weather took the pressure off energy prices and allowed Europe to avoid a shutdown of their economy," he said. "China's decision to end zero-COVID-19 has boosted economic activity, drawing in demand for commodity imports which have benefited many emerging economies."
Meanwhile, if interest rates keep climbing and inflation remains high, institutional investors in the U.S. should focus on quality.
In equities, that means owning companies with strong cash flows and pricing power, while in fixed income Treasury bills are a safe haven, Mr. Rosen said.
"Should inflation diverge geographically, look to foreign markets for more attractive investments," he added.
Angeles Investments is an institutional investment management and private wealth firm that serves as the outsourced chief investment officer for non-profits, endowments and health-care foundations
"All these investors must balance the unique liquidity demands on their portfolios with an eye toward long-term growth in excess of inflation and spending," Mr. Rosen added. "Generally speaking, these institutional investors set investment strategy to optimize their unique constraints and objectives. Health-care entities must be able to support operations that have a level of uncertainty around revenues and expenses, pensions must consider their specific liabilities when setting an investment strategy. Endowments and foundations generally have more visibility around their future commitments, and can adopt an investment strategy consistent with those commitments."
Angeles has $36 billion in assets under advisement, comprising $6 billion discretionary and $30 billion in consulting.
