We discuss the recent QQQ and SPX sell-off, merited in part by a change in macro conditions and perceptions about growth. Financial conditions have materially tightened and are now the least “loose” since early in 2021. The 2022 US GDP forecast is about 25bps lower from its peak late in 2021, having slowly declined, without a single uptick.
We did some new work on interest rates that go beyond the basic measurement of the relationships between historical stock performance and the 10-year yield that we initially did over a decade ago.
We have long thought that what matters to investing is changes to perceptions about growth and changes to perceptions about rates. In that light, we analyzed the Fed Funds future curves over multiple horizons (6,12,24, etc. months) minus the Fed fund rate as a proxy for changes in perception of interest rates vs. subsequent stock return
Our 2022 outlook is focused on long and short stock ideas followed by some analysis on changes in multiples and market dynamics. Though we do not do deep fundamental analysis as a firm, these stock ideas are ones that embody the themes of our research. They are meant to stimulate thought and idea generation for our clients. Please do not hesitate to contact us to discuss our work.
Our latest market overview: a comprehensive document containing the best of our recent work and up-to-date views.
We provide a detailed quarterly summary to help investors prepare for their quarterly investor communications as well as identify emerging risk management concerns. We break our quarterly analysis into several areas of interest: performance facts, factor efficacy, the opportunity set, corporate profitability, macro / economic developments, and data from 13F filings and insider transactions.
We have seen a massive deviation in healthcare sector stock performance in 2021. Given the idiosyncratic nature of the sector, meaningful performance deviation is normal. However, this magnitude of performance deviation catalyzed us to look for valuation / growth disconnects and search for opportunities.
The recent market volatility started as a result of opinions over a perceived Fed pivot and the new COVID variant. Corporate commentary generally indicates a slow path toward the resolution of the logistics, transportation, and supply-chain bottlenecks induced by COVID, with many suggesting normalization is expected in the second half of 2022, albeit with some variability depending on product. Given the risk-off / risk-on trading volatility, we took a step back to analyze macro trends and make a data-driven conclusion about the environment.
Our latest market overview: a comprehensive document containing the best of our recent work and up-to-date views.
With lots of questions about the M&A environment, big company break-ups (GE and JNJ), and companies trying to grow, expand margins, or change their multiple, we evaluated the market’s reward and penalties for deals. We found that the initial market reaction to a deal has predictive value, especially for banks and value stocks.
We review investor commentary on our most recent notes and respond to various questions and criticisms.