Cliff Asnes is surprised that moving from 0% to 5% interest rates didn't curb speculative froth more. His theory is that a long period of "free money" may have permanently altered investor psychology and risk perception, and these behavioral shifts don't simply revert when monetary policy normalizes.

In high-inflation environments, stocks and bonds tend to move in the same direction, nullifying the diversification benefit of the classic 60/40 portfolio. This forces investors to seek non-correlated returns in real assets like infrastructure, energy, and commodities.

Contrary to conventional wisdom, re-accelerating inflation can be a positive for stocks. It indicates that corporations have regained pricing power, which boosts earnings growth. This improved earnings outlook can justify a lower equity risk premium, allowing for higher stock valuations.

The only way ESG investing can effect change is by starving "bad" companies of capital, raising their cost of capital. For the market to clear, non-ESG investors must own those stocks and will only do so if compensated with a higher expected return. Therefore, the ESG portfolio must, by definition, have a lower expected return.

Amid political polarization, explicit ESG investing has faded. However, capital continues to flow into energy projects under the more neutral label of "infrastructure." This allows investors to support traditional and transitional energy development while avoiding the controversy associated with the ESG moniker.

The pivot away from purpose marketing back to product superiority was driven by economics, not philosophy. The era of near-zero interest rates allowed for "fiscal incontinence" and brand purpose indulgence. When rates rose, expensive corporate debt forced CMOs to prove ROI and focus on selling products to service that debt.

For 20 years, pension funds and endowments shunned investment in mining and resources due to political and social pressures. Now, a confluence of geopolitical necessity and reshoring is creating a demand shock that institutional capital is unprepared for, forcing them to chase a supply-constrained sector and exacerbating the rally.

While not technically inflation, rising energy costs are perceived as such by working-class citizens because they make everything more expensive. This direct hit to their finances is a powerful driver of political dissatisfaction, regardless of other economic indicators.

Contrary to popular belief, the current upward inflationary pressure is a net positive for equities. It is not yet at a problematic level that weighs on growth, but it is high enough to prevent a more dangerous disinflationary growth scare scenario, which would trigger a full-blown "risk-off" cascade.