Paul Skinner 5.0 4 ideas

The market is too sanguine on oil prices, which are currently discounted at $70/barrel, but the floor is about $85. This will create an inflation pulse, and central banks, most of which are running policy ahead of target, will have to react with rate hikes. The policy response will vary by country, with the ECB as an inflation-fighter likely to hike while the Fed may do nothing.

Investors should shorten duration and be careful with leverage because a period of higher yield and lower growth will more negatively affect indebted countries and companies. Avoid high-risk, high-yield companies and focus on quality, well-run companies with strong balance sheets that have de-levered.

Charter Communications is an example of a quality company that has de-levered its balance sheet over the past four or five years, making it better positioned for an environment of rising cost of capital and slowing growth.