What Now?

Most recently, the Bull wrote a special blog discussing the recent invasion of Ukraine and its ramifications for investors. This is available on our website at www.riverplacecapital.com. For our regularly scheduled blog, the Bull would like to go into a little more detail as to what to expect within our stock market.

Growth stocks were under pressure from rising interest rates. Higher rates disproportionately affect growth stocks by reducing the multiple investors are willing to pay for earnings. As a result, the growth category has suffered a severe correction. In fact, the correction looked to be far more than was called for, but markets tend to swing to extremes. After the start of the Ukraine war, it became immediately apparent that the Federal Reserve would have to temper its withdrawal of accommodation by raising rates and reducing its holdings of bonds. Both would have to be done more slowly to avoid killing the economy. Growth stocks rallied and will probably continue to recover.

Cyclical and other value stocks were leading the market, but now with increased inflation for longer, investors are making the calculation that their profit margins may come under pressure. Although many companies have been passing along increased costs, there is a limit. Therefore growth, which was out of favor, has suddenly come back in and the value leadership is now being questioned.

Last year, market leadership swung back and forth between value and growth. At the end of the year, both strategies had almost the same results. That may happen again in 2022. Trying to catch these shifts is almost impossible. The Bull and his partners balanced our strategies by having some of both styles. We believe that will prove to be effective once again. Stay steady, my friends.

The Lonely Bull