Market Musings 5/9/2022
Quick thoughts on the markets and major portfolio news. Not on Ursa yet? Download Ursa from the App Store!
We focus on fundamentally strong investments with long-term time horizons to weather market down cycles
Coming into 2022, market sentiment was already increasingly bearish with aggressive #RisingYields expected to combat surging #InflationFears. #UkraineCrisis uncertainty around energy and commodities compounded that sentiment and gave rise to global #RecessionWatch fears. Bearish sentiment really started to snowball following last week’s Fed 50bps rate hike despite an initial power hour rally. Year-to-date, investors have fled risk assets like stocks with the S&P 500 in correction down -16% and tech-heavy NASDAQ into bear territory down -22%.
With #InflationFears flaring up early last year, we’ve been shifting our portfolios towards a #Flight2Safety tilt. However, last year’s impact was more limited due to a slow-to-act Fed (remember all the “transitory” commentary? 🙄). While last year was a little early, this year has been the perfect storm with Value names significantly outperforming Growth by a +17% differential YTD (as of 5/9). With more uncertainty ahead, we believe it is prudent to maintain our #Flight2Safety portfolio focus near-term.
While we believe #Flight2Safety‘s attractive valuations and dividends will be stronger overall near-term, we still see some secular opportunities across the portfolio. #COVIDRecovery strength particularly #RevengeTravel has been lost in the #RecessionWatch news cycle. We also see opportunities with #RisingYields for Financial names and defense spending shifts globally. With #Flight2Safety as our portfolio’s foundation, we’re still excited for pockets of strength that can outperform near-term.
So what about our high-growth tech names? Outside of #RisingYields impact on valuation multiples, we don’t see long-term, fundamental business or market issues with our Technology and other Growth names. Economies, markets and businesses all go through cycles. As long our investment thesis remains intact, time is on our side as long-term investors. We would be more cautious of near-term volatility with Growth names, but see long-term opportunity to build positions at more attractive valuations (aka lower prices).
As a long-term investor, the hardest part is to not get sucked into the daily volatility of the stock market. It’s easy to watch when markets are going up, but frightening when markets fall. We’re disappointed too when markets are down, but it’s important to remain calm. Nobody can perfectly time the market. That’s why we focus on fundamentally strong investments with long-term time horizons to weather market down cycles.
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The statements, opinions and analyses presented here are provided as general information. This article is the opinion of the author. Anything within this article should NOT be considered an investment recommendation or advice. See Ursa’s full disclosures here.