Skip to main content
My Account 

THE LAST MILE

By: Tony Minopoli

Anyone who is familiar with transportation knows about the industry’s concern with the cost of the last mile. Logically, when a tractor-trailer leaves a factory with goods, a large truck is efficiently packed and likely heads off to a distribution center. Once at the warehouse, the modern marvel of logistics takes over and products are distributed by type and geography and then sent in other trucks or planes to the next link in the chain. The last mile is often said to be the most expensive because that is where a package is driven to a specific location for delivery. This is the costliest and least efficient because a driver can only deliver to one address at a time.

Now, I am not package mad due to the abundance of delivery drivers leaving packages at my front door, however, the concept of this last mile got me thinking about the Fed and inflation. Also, as we roll from 2023 to 2024, my inbox is clogged with reviews and outlook documents from numerous firms. As you can imagine, these outlooks range from “everything is going to be fine” to “the sky falling”. The “everything is going to be fine” crowd looks at how inflation has come down and is ever so close to the 2-2.5% range desired by the Fed. The “world is doomed” crowd is focused on the massive amount of Treasury debt that needs to be refinanced and that the continued strength of the labor market, and therefore wages, will make it difficult for inflation to neatly move back into the desired Fed range.

The world is rarely so binary that the outcome will either be heads or tails. I have this nagging sense that the last mile will be more difficult than the average investor believes. The rapid move from peak inflation of over 9% to current levels is indeed something to behold. However, the market is pricing in numerous Fed rate cuts, and in a previous post, I discussed our view that the soft landing as the likely outcome is a fairly crowded trade. Keep in mind that the Fed has significant debt to refinance in 2024 and the Government has shown an absolute inability to rein in spending, so that could provide a headwind to this outcome.

We continue to believe that a slowdown will occur in 2024 and it may not be so neat as to leave everyone unscathed. Some research seems to be focused on the fact that we are about flat over a two-year period because 2022 was really bad and 2023 was really good. If the Fed gets the inflation thing right, we are off to the races again. This last mile will be the most difficult because, at a time when the economy may be slowing, the U.S. will continue to issue significant amounts of Treasury debt to finance our existing debt, and this will continue to be pressured by the employment market and stubborn inflation.

This commentary has been prepared by Knights of Columbus Asset Advisors (“KoCAA”) for informational purposes. Nothing contained herein should be construed as (i) an offer to sell or solicitation of an offer to buy any security or (ii) a recommendation as to the advisability of investing in, purchasing or selling any security. Any opinions and information expressed herein reflect our judgment and are subject to change without notice. Certain of the statements contained herein are statements of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation, (1) general economic conditions, (2) performance of financial markets, (3) interest rate levels, (4) increasing levels of loan defaults, (5) changes in laws and regulations, and (6) changes in the policies of governments and/or regulatory authorities.

KoCAA is an SEC registered investment adviser that maintains a principal place of business in the State of Connecticut. For information about KoCAA’s business operations, please consult the Firm’s Form ADV disclosure documents, the most recent versions of which are available on the SEC’s Investment Adviser Public Disclosure website at adviserinfo.sec.gov. KoCAA is a wholly owned subsidiary of Knights of Columbus, one of the world’s largest Catholic Lay Organizations. Investing involves risk and you may gain or lose money on your investments. For additional information visit KoCAA.com or write to kofcfunds@kofcassetadvisors.org.