Reflation and Rotation - Knowledge Leaders Capital

Reflation and Rotation

April 20, 2021

By Steven Vannelli, CFA in Knowledge Leaders, Markets, Portfolio Management

In this Q1 2021 slide presentation of our quarterly strategy report, we discuss the following topics:

-The level of speculative activity in markets this year has been extreme in our view. More money has come into world stock markets in the last 5 months than in the last 12 years cumulatively.

-In the last 14 months the combined fiscal and monetary stimulus have been massive. Fiscal + Monetary + Vaccines (re-opening economies) are a hugely stimulative combination. The expression goes “Don’t fight the Fed.” But right now, it is really more like “Don’t fight the Fed, the Treasury, the CDC & science.”

-The potential that inflation reaches a level higher than expected and persists at that level for longer than is expected is our opinion.

-The outperformance of cyclicals and interest-sensitive stocks seems to validate the expectation that inflation will be higher for longer. The increase in fed funds future yields also suggests that the market expects inflation to force the Fed to begin raising rates sooner than they are currently articulating.

-There is true innovation, and there is innovation speak. Words like “disruption” are telltale signs of innovation speak. Investors should be wary of innovation speak as a justification for elevated valuations.

-There are many companies out there in the world pursuing innovation strategies across a variety of industries. We highlight 15 of them.

Download slides here: Reflation & Rotation

(A different version of this Q1 2021 Quarterly Strategy Report including investment product performance is available on the investment product websites.)

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The information presented here is for informational purposes only and is not to be construed as an offer to sell, or the solicitation of an offer to buy, securities. Some investments are not suitable for all investors, and there can be no assurance that any investment strategy will be successful. Hyperlinks may be included in this message that provide direct access to other internet resources, including web sites. While we believe these links are to reliable sources, Knowledge Leaders Capital (“KLC”) has no control over the accuracy or content of information contained on these sites. Although we make every effort to ensure such links are accurate, up to date and relevant, we have no control over pages maintained by external providers. The views expressed by these external providers on their own web pages or on external sites they link to are not necessarily those of Knowledge Leaders Capital.

The information provided on this blog is for illustrative or example purposes only and should not be construed as KLC’s opinion or investment outlook. As of the most recent quarter end, the named companies may have been held by KLC. For full information including additional policies and full disclosures, please visit our website: KnowledgeLeadersCapital.com.

Any reference to Index performance does not represent the performance of any investment product offered by Knowledge Leaders Capital, LLC. An investor cannot invest directly in an index. The performance of client account may vary from the Index performance. Index returns shown are not reflective of actual investor performance nor do they reflect fees and expenses applicable to investing.

Companies are selected for “Spotlights” based on high levels of innovation activities in their respective industries and illustrate innovation being employed across all sectors and geographies. Spotlight selection is separate from stock selection by the investment team. Spotlights are not necessarily representative of investment opportunities and can be selected regardless of investment performance or inclusion as a KLC holding.