Quality Growth Boutique

2Q 2021 US Equity Outlook: Diverse opportunities as markets normalize


Diverse opportunities as markets normalize

CIO Matthew Benkendorf discusses challenges in the regulatory and business operating environment, specifically in the tech industry.

  • Higher interest rates are an indication of an improving economy and inflation expectations. While higher rates may impact owners of long-duration assets, they are positive for a return to economic growth coming out of the pandemic, as well as reasonable pricing of risk assets.
  • Parts of the market, such as renewables and green industries, are already factoring in increased spending on infrastructure. However, following large-scale fiscal stimulus, there is likely to be intense political debate about whether the economy needs more investment, which could bring further volatility this year.
  • A narrow focus on sectors and stocks has delivered outsized returns for some investors in recent quarters. However, investors need balance to consistently achieve success over the long-term. There are opportunities in the markets today to strike a balance across a variety of sectors, in companies that performed well throughout COVID-19 and those that are normalizing after the pandemic.
  • The regulatory and business operating environment is becoming more difficult for companies regardless of the administration in charge. For instance, the tech industry – both in the US and globally – has benefited from a relatively benign backdrop over the past decade but now faces a more challenging environment.
  • There are signs the pendulum is swinging away from capital and towards labor. This could result in labor market tightness and higher wages, which in turn will have consequences for companies and equity markets.
  • It is important to focus on quality in today’s markets. We seek to own businesses with good, visible earnings and maintain conviction that they will emerge strongly from any market volatility.




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