Navigating a Minefield - Knowledge Leaders Capital

Navigating a Minefield

April 12, 2022

By Steven Vannelli, CFA in Economy, Markets, Portfolio Management

In this quarter’s strategy report, Navigating a Minefield, we discuss the following:

-The Fed is tightening into a growth slowdown. Unlike in 2015, the Fed has just lifted off while the ISM Manufacturing is contracting and real GDP estimates for 2022 are steadily falling. If the FOMC sticks to its schedule of economic projections, the 2022-23 tightening cycle is set to be as rapid as Greenspan’s 1994-95 tightening cycle. But they do also recognize the possible downside risk to growth if they stick to their tightening schedule.

-The Fed increased the size of the balance sheet from roughly 20% of GDP to over 37%. It will take them through the end of 2028 to get their balance sheet back to 20% of GDP.

-The current surge in inflation has historic precedents. On average, inflation falls about 3% 12 months after peaking.

-Recent high frequency stats are definitely showing a slowing trend coming out of China. Concerns about government interference, growth, the property sector and COVID have led the China Policy Uncertainty index soaring. Is a weakening Yuan a prospect?

-Earnings season is coming up in the next couple weeks and it is crucially important for companies to turn in a good performance. While analysts were decreasing EPS estimates in aggregate for the first quarter, they were also increasing EPS estimates in aggregate for the next three quarters. The bottom-up EPS estimate for the second quarter increased by 1.6% (to $56.07 from $55.16) from December 31 to March 31.

-Over the last 20 years, April has shown the best monthly return of the year for the S&P 500: 2.41%.

-We conclude with a group of spotlights on innovative companies around the world.

DOWNLOAD SLIDES

Print Friendly, PDF & Email

Archives

Disclosures

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.