After two decades of underperformance, we are seeing the return of value as an investment strategy. Buying conservatively valued companies seems a better play than buying promises of elevated future profits.
It’s been a pretty bad start for the year on the markets. Filipe R Costa asks whether this is a buying opportunity or a warning.
This week the S&P 500 closed on a positive note and put an end to a multi-week losing streak that almost led the index into bear territory.
Financial markets are on a roller coaster this year. On the one hand, we have very unfavourable macro and geopolitical conditions. But, on the other hand, the ‘bulls keep buying the dips’.
A mix of conditions, including disruption created by the pandemic, years of monetary easing and the Russian invasion have all contributed to a fertile investment environment.
Only two months into the year, we also have a war in Europe, commodities at skyrocketing prices, supply-chain disruptions and even higher consumer prices.
With bonds offering almost nothing and threatened by inflation, Filipe R Costa believes that dividend-paying stocks may be a good bet.
With the Omicron variant less harmful than its predecessors and life returning to normal, the focus is now on what’s happening to the economy and how central-bank policy will unfold in the near future.
Even though the fundamentals are currently favourable, Filipe R Costa believes the demand side of the market may not support this much longer.
This year will be all about the outlook for rates instead, as central banks around the world move together into a new rate cycle.
