SUMMARY. To sum up 2021 vs 2020 so far its a battle between growth stocks (ie technology/EV/bio tech) vs value stocks (ie tied to the economy). Last year, growth valuations grew while value stocks lagged behind. So far in 2021, tied to the stimulus & reopening of the economy the complete opposite has occurred and volatility is at extreme levels particularly in emerging high growth names. The week marked a significant sell off in growth stocks as the battle of speculation between sellers & buyers peaked. As mentioned last week, the economic growth euphoria may have peaked with the passing of the stimulus as well as talk of an infrastructure bill. With the threat of higher taxation looming and a variety of other economic issues including high debt levels & interest rates our view on value stocks has change. We question whether so called "value" is any longer value as valuations have grown. In addition, we continue to assume 2022 will see slower overall economic growth. As we move through the year we suspect this may weigh on value stocks tied to the economic cycle shifting emphasis to growth stocks which have recently seen extreme selling.
INVESTMENT IMPACT. Cash/bond allocations especially in growth models were raised this week somewhat. We deem it prudent to maintain high cash levels as we expect volatility to continue. However, we shifted allocations to growth stocks from value stocks as the sell off accelerated in that segment. The growth names we added (media, medical devices & EV car manufacturer) are in areas where we believe growth can occur despite a shift to slower overall economic growth which may occur in 2022. Valuations have been reduce considerably in certain growth names thus why we added a select handful of stocks. We suspect a shift back to growth may occur in 2H21 as worries on economic growth begin yet again and interest rates & inflation begin to retreat. Our significant holdings in utilities and health care continue for both dividend yields and lower volatility, but we have eliminated our value names tied to the economic reopening as a result of valuations and economic euphoria.
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.