First Half of 2022
In my previous two “Ken’s Korners”, I noted that I believed value stocks should begin to outperform growth stocks. While 2021 was a strong year for both value and growth stocks, the start of this year has been very painful for the growth area of the market while value stocks greatly outperform year to date. I expect this to continue for perhaps several years.
Rising interest rates and inflation, along with historically high valuations for growth stocks has led to a major correction for the group. Meanwhile the value area with much more reasonable valuations has been holding up well. A couple of our recommended mutual funds demonstrate a rather drastic difference in performance through February 17th with the value outperforming by nearly 1600 basis points.
Inflation is on the minds of most investors and for good reason as we have not seen anything like this since the 1980’s. We do think inflation will persist but come down significantly from the current 7% pace over the next 12-18 months.
Looking ahead, I continue to believe, value, international, commodity related products will outperform. These areas have worked well and should continue in this environment. Fixed Income has also been weak as interest rates rise and the Fed signaling numerous rate increases this year. We think fixed income should be very diversified as well.
While the short term seems quite pessimistic due to rising inflation, interest rates, the pandemic, Russia/Ukraine tensions and overall weak markets, we remain bullish long term. Businesses are holding record amounts of cash, consumer’s savings and finances are in solid shape and there should be much pent up demand in many parts of the economy. This will be a more selective, stock picker’s market looking forward which we embrace.
Best regards,
Ken
Any opinions are those of Kenneth M. Lampos and not necessarily those of Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. There is no assurance any of the trends mentioned will continue or forecasts will occur. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the forgoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Past performance is not indicative of future results. International investing involves special risks, including currency fluctuations, differing financial accounting standards, and possible political and economic volatility.
