ECONOMIC IMPACT. Covid-19 cases worldwide continue to ramp although in some geographies signs of peaking (ie UK & NE United States) are potentially surfacing. In mean time the downshift in economic growth is becoming more evident as jobs added, NY Empire Manufacturing and housing all saw weaker indicators this week. On top of this major US banks reported disappointing earnings as well. All signs point to a WEAKER economic and inflationary environment as the Fed takes aggressive action in months to come. We continue to await signs of Covid-19 abatement in coming weeks as this may act as a catalyst in changing the market leadership as well as proving some economic support.
INVESTMENT IMPACT. Technology which was one of the stellar performers (esp large tech firms) last year has reversed course and entered correction territory in our view in recognition of slower economic environment and rising interest rates. Regardless of whether this continues we maintain our overweight health care awaiting Covid-19 case reduction as the catalyst to potentially have health care lead the market higher. In mean time, funds continue to liquidate RISK especially in technology and until equity exposures get reduced volatility will likely continue. History says that NEW market leadership may not emerge until the overall market has bottomed post fund liquidations. However, that does not mean the opportunities that exist in those areas that maybe shielded from a slower growth environment won't emerge and rise when markets rise again. To emphasize the point despite 2 of our top holdings pre-announcing better quarterly earnings recently that has not lead to shares rising in near term. Since our thesis in slowing growth is playing out our model portfolios remain overweight health care.
Our model portfolio performance has been updated on our website as of 12/31/21.
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