Updated: Jan 21, 2022
ECONOMIC IMPACT. As Covid-19 cases explode and worries on inflation/ interest rates and future Fed policy actions mount we continue to monitor potential catalysts that may result in a shift to health care stocks. As inflation wanes and growth slows while Covid-19 peaks the potential for investors to seek "safer" growth alternatives exists. We believe one area is in health care.
INVESTMENT IMPACT. We believe within the next few months there maybe a shift on views in regards to Covid-19 cases and its effects on the broader economy. A growing body of evidence is that although cases have exploded higher and will probably continue to in near term, the latest variant IS NOT as deadly and in fact relatively mild in nature vs history. As a result the potential is for cases to FALL SIGNIFICANTLY as we move thru the year as herd immunity takes hold. Further, the Supreme Court is now reviewing the administrations vaccine mandates that have cause significant hiring shortages and disruptions. We believe there exists a significant chance that such mandates are ruled UNCONSTUTIONAL (esp in light of vaccinations have proven in effective in stopping the spread of Covid-19) thus alleviating staffing shortages that exist in overall economy and in health care. As reminder health care demand for procedures may have been delayed as a result of above but not eliminated or destroyed forever--instead in maybe just delayed. Thus, the exposure to health care stocks that exhibit secular growth characteristics that have fallen significantly.
It is the TWO disruptions described above that have cause health care stocks (as well as broader concerns on valuations/ risk especially in small capitalization stocks) to decline in our view. The good news is that these disruptions MAY BE transitory as we move thru the year. Thus why we maintain our overweight. Despite, the positives that waning cases & staffing will have on economic growth slowing growth may still be result as rates rise and QE (quantitative easing via FED) slows significantly. Thus, our avoidance of other areas of economy ex health care.
Our model portfolio performance has been updated on our website as of 12/31/21.
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