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BCA Weekly Commentary 11/12/21: Fully Vested Overweight Health Care


SUMMARY. Our economic growth concerns remain as inflation remains very high (6% reported in CPI but in our view much higher) driven by runaway fiscal spending. This is eroding consumer spending and eventually may way on growth overall. At same time the Federal Reserved moved forward on plans to reduce bond buying (ie QE) for the first time in quite a while which may pressure interest rates to go higher. Although additional fiscal spending may act to accelerate growth near-term ultimately it may not lead to sustainable growth there after as inflation offsets its effects. As a reminder real wages for workers are DECLINING not rising which is the fuel to consumer spending driving US economic growth historically. In 2022, our assumption is inflation should subside, but remain elevated as growth wanes throughout the year as well as supply chain distributions get sorted out pressuring prices.


INVESTMENT IMPACT. We remain fully invested across models, in fact slightly overweight equities (VS bonds) as interest rates may rise into 2022 pressuring bond prices. We continue to see value in health care and remain overweight (60% plus of the portfolios) tied to our assumption economic growth may wane next year. In particular, we are finding many heath care names significantly below their 52 week highs which are experiencing covid-19 related growth disruptions and as they get sorted out into 2022 may cause a re-acceleration in growth. As US economic growth wanes in 2022, as well as inflation, we expect a gravitation back to small capitalization stocks and heath care in particular which generally less impacted from economic growth variations.


Our model portfolio performance has been updated on our website as of 10/29/21.


For more insights see our website and disclosures found there at BCA. The thoughts contained in this newsletters are intended lend insights into BCAs current & future thinking on changes to BCA model portfolios. They are not intended to be recommendations and should not be taken as such. As always contact us for further explanation of how these events can affect your finances. To unsubscribe from our newsletters & website please email us with "unsubscribe" in the subject.

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