Updated: Feb 27
SUMMARY. As outlined previously, we continue to balance the positive short term growth impacts on massive fiscal stimulus (pending) and the negative effects it creates. This week marked the beginning where negative effects such as interest rates offset stimulus efforts. Unlike other periods of stimulus we may have passed the threshold of only seeing the positive growth effects of stimulus and now entering a period of negative effects at work producing only margin growth overall. Our assumption is that this will largely result in much more muted economic growth to come in 2022 thus possibly entering a "lost decade of growth". The importance of this is either fiscal or monetary stimulus (and an economy dependent on it to grow) may have shorter and shorter positive impacts resulting little if anything gov't can do to manufacture growth post covid-19. The possible end result, especially with increased regulation and taxation to come, a sustained period of very slow growth beyond 2021.
INVESTMENT IMPACT. Our model portfolios have an overweight in defensive sectors (most weighted: utilities/healthcare) with some balance in value (media, retail & materials) and growth (technology & medical devices). Many equity position posses a relatively high dividend yield as well. We remain very selective in adding names to model portfolios given high valuations particularly in growth stocks. This week, we added marginally to our equity positions in the growth arena that may posses favorable risk/reward. We remain cautious on valuations, investor speculation and high growth expectations and are prepared to increase cash levels when appropriate. We believe stock picking may become increasingly important for returns.
Our model portfolio performance has been updated on our website as of 2/28/21.
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.