Wow! What a rollercoaster first quarter!
Two significant themes are fighting for leadership: Reopening (value) and shutdown (growth)
The United States is reopening full steam ahead. The European Union and the United Kingdom are in a third-wave lockdown.
These broad real-world differences are leaking into the investment world.
If you remember, from March-August last year, the leading investments were technology companies (growth)
However, a shift occurred around September of last year, where value ideas began to lead for the first time in almost twelve years.
Value (Banks, Industrials, Transports, Metals, and Mining, etc.) are the leaders, and growth-oriented investments (Technology, Internet, E-commerce) are laggards for 1st quarter of 2021.
We should stay the course with value-oriented ideas as spring and summer approach for several reasons.
First, In my experience, Inflation and consumer spending usually peak in August.
Second, we just spent another 1.8 trillion in stimulus, which will take time to be layered into the economy.
Third, because the fog of war is dense in hard times, people are still terrified and unsure about their outlook. Having invested through three recessions, I learned that this is typically the best time to be optimistic and bullish.
Several factors are fighting my optimism -trade inflation, manufacturing delays, political interference, and COVID-19 mutations.
Manufacturing and tradeInflationn are taking their toll on consumer and business profits. As other countries deal with Covid-19, the output of raw materials and consumer goods has slowed, creating inflation in shipping rates and consumer prices.
Excessive margin leverage by retail investors is another cause for concern. We are bumping on historical highs from 1999; this can bring extreme volatility from traders and short-term investors.
Political interference is an ‘X’ factor! But experience has told me to mute those concerns until they become policy. (Personal opinions of political preference are for conversations with scotch)
To sum it up, volatility is a headache that is very hard to minimize in times of uncertainty. I want to remind people that if you have a concern, please don't think twice about calling or emailing me about questions and my outlook.
All my best
Christopher R. Lakian