SUMMARY. Our core assumption for our 7 model portfolios continues to be for 2022 to 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 especially those who have yet to prove ability to post post positive earnings. Despite, what we deem "growth euphoria" in near term, we remain cautious on growth going forward beyond the next quarter or two. As an observation, many Chinese indices (MCHI to name one) have corrected 20% for similar growth concerns post the Covid-19 recovery. China was one of the first countries to begin reopen & recover after implementing fiscal & monetary measures to spur growth. As an addition reminder, China has not raised taxes to pay for such measures which may occur here in US.
INVESTMENT IMPACT. Cash/bond allocations especially in growth models were raised this week again with additions to bond holdings. We deem it prudent to maintain high cash levels as we expect volatility to continue. Despite, recent weakness in some of our more volatile holdings that are growth oriented, we added to some of them, tied to our long term outlook & conviction for growth for these specific stocks. We have concentrated allocations in stocks that we deem undervalued relative to their long-term growth potential which can be held through any future volatility. We continue to suspect a shift back to growth may occur in 2H21 as worries on economic growth begin yet again and interest rates (may have started to occur) & inflation begin to retreat. Our significant holdings in utilities and health care continue for both dividend yields and lower volatility. Outside of these sectors we favor foreign growth oriented holdings tied to the prospect of higher corporate tax rates here in US.
Our model portfolio performance has been updated on our website as of 3/31/21.
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.