Hedge Clippings | Friday, 22 April 2022
At the end of last year Hedge Clippings' headline was "Certainty in Uncertain Times," as we speculated that inflation was here and now, but with uncertainty whether it was transitory or not. We also knew that interest rates were going to rise, but how soon, and by how much, still seemed unclear.
Four months later, and the times seem more certain and uncertain than ever: The outlook for inflation seems clearer, higher, and more certain, while interest rates - at least based on Jerome Powell's overnight comments - are likely to rise by 50 bps at the Fed's meeting in May. Thanks to the election, the RBA is unlikely to move prior to June, but there are strong expectations for 2 or possibly 3 more moves prior to the end of the year. The longer term question will be the balance between rising rates taming inflation (much of which is global, supply chain induced or driven by the war in Ukraine) before damaging the economy, with predictions of a recession in the US by 2024.
The tech heavy Nasdaq is now below its level of 12 months ago, confirming that the valuations assigned to the so called "growth" sector are a thing of the past (even leaving aside the difficulties experienced by Netflix this week). The broader S&P500 is faring better, but still well below its December peak, while locally the ASX200 still hovers close to it - for the moment.
Politically, both locally and globally, uncertainty seems entrenched. With no clear end in sight, the war in Ukraine will both stretch on, and even assuming a cease fire, will stretch relations between NATO and Russia. Locally, the outcome of the Federal election on May 21 is likely to lead to further uncertainty on the domestic front.
In this environment, manager and fund selection is more critical than ever, as is diversification across strategies, sectors and geographic mandates.
News & Insights
Airlie Insight: The dominant narrative of 2022 for stocks | Airlie Funds Management
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March 2022 Performance News
Glenmore Australian Equities Fund
Delft Partners Global High Conviction Strategy
Paragon Australian Long Short Fund
Bennelong Twenty20 Australian Equities Fund
Insync Global Capital Aware Fund
Quay Global Real Estate Fund (Unhedged)
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