Impact Growth Capital Newsletter

A Pivotal Moment for Central Bank Independence

Impact Growth Capital
January 28, 2026

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This week at IGC:
Escalating political pressure on the Federal Reserve is introducing a new structural risk: the erosion of policy credibility as a portfolio input.

Core Insight

When central bank independence becomes a market variable, you cannot hedge political risk through diversification alone. Portfolio architecture must change.

Three Critical Implications

Bond market volatility increases, impacting real estate financing and valuation assumptions
Traditional 60/40 portfolios face correlation breakdowns as stock-bond diversification becomes unreliable
Over-leveraged operators get exposed while disciplined capital finds acquisition opportunity

Our Analysis

When central bank independence becomes a market variable rather than a structural assumption, traditional portfolio construction faces embedded fragility. You cannot hedge political risk through diversification alone.

Safety Weight

Workforce Housing

Necessity-based demand. Inflation-linked income. Tangible asset backing independent of Fed credibility. Operational control over value creation.

Growth Weight

Vertical SaaS

Asymmetric returns uncorrelated to public markets. Value creation driven by execution, not rate cycles. Recession-resistant when focused on mission-critical software.

Together, these avoid the "mediocre middle" portfolios dependent on policy stability for returns.

In short, the environment begins to reward capital allocation discipline over passive market exposure.

Why This Matters for Portfolio Construction

When the path of rates becomes less predictable not because of economic uncertainty, but because of policy process uncertainty portfolios heavily concentrated in duration-sensitive assets face structural fragility.

This includes:

• Long-duration fixed income holdings reliant on stable rate expectations
• Real estate strategies underwritten to specific refinancing assumptions
• Traditional 60/40 portfolios dependent on negative stock-bond correlation
• Over-leveraged private market positions assuming continued access to credit

Moving Forward

This is precisely the type of environment our Barbell Strategy is designed to navigate.

Discipline Over Direction

The key variable is not whether rates move higher or lower. It is whether capital is aligned with managers who underwrite for downside first, maintain leverage discipline, and reject 95% of opportunities.

Over-leveraged operators who underwrote to 4.5% debt now face 6%+ refinancing. Some will sell. This creates opportunity for disciplined capital.

Perspective: Eleven years in Air Force Intelligence taught me to identify structural risk before consensus. Political pressure on central bank independence is a regime variable requiring portfolio architecture designed for resilience, not prediction.

Jesse

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