Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Ruchir Sharma, chair of asset management firm Rockefeller International, argued that private investing might be a bubble in a column for the Financial Times,
“If a bubble is a good idea gone too far, the $10-trillion global market for private investing in everything from debt to companies to real estate may be one… What started as a sound idea has become an escape from something else entirely: reality. In return for the promise of superior returns, private funds typically “lock in” client money for up to 10 years, then report to clients much less frequently than public funds do — quarterly at most, not daily. In the new tight money era, with losses spreading across asset classes, private channels have become a way for money managers to conceal losses from clients — typically capital allocators at pension funds or other big savings institutions — who are often content in the dark. They don’t want to face the agonies of daily volatility either.”
“How private markets became an escape from reality” – Financial Times (paywall)
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Morningstar’s Sandy Ward discussed the four big painful lessons for investors in 2022,
“Valuations Matter … Valuation was key this year,” says David Sekera, chief U.S. market strategist at Morningstar, who warned investors early on that the broad stock market was overvalued. “Investors need to know what they are paying for.” Indeed, value stocks—those whose prices typically don’t reflect their true worth based on their fundamentals and underlying assets—have delivered returns this year that have far outpaced their growth counterparts … Interest Rates Matter. Never in our lifetimes has there been a collapse of bonds such as was witnessed this year. The yield on the 10-year Treasury, at a recent 3.59%, has more than doubled since the start of the year, clobbering prices … Inflation Matters … The massive government stimulus programs that injected trillions into the economy to help keep businesses and households afloat during the early stages of the pandemic and beyond played a big part in driving inflation higher and helped set the stage for the seven rate hikes in 2022… ther contributors include supply chain disruptions stemming from factory shutdowns and worker shortages due to COVID-19. Geopolitics played a role, too, as Russia’s war against Ukraine highlighted Europe’s energy and food vulnerabilities … Passive vs. Active Strategies Matter And not the way you might think… Buying an index fund or exchange-traded fund tied to a major benchmark such as the S&P 500 in early 2022 gave investors much more exposure than they likely knew of to a group of technology stocks that dominated the index, accounting for about one third of the overall market cap of the index. That represents huge concentration risk. With index funds, there’s also no way to know whether you are overpaying or underpaying for the underlying stocks.”
“What Investors Can Learn From a Terrible Year”: Painful lessons from the markets to take into 2023 and beyond.” – Morningstar
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Citi analyst Itay Michaeli found growing interest in General Motors electric vehicles,
“(1) Overall EV website traffic still gaining momentum on a trailing 12-month basis, though recent trends look a bit softer. (2) Tesla still holds the most dominant ‘mindshare’ position at ~39% but is losing share to both EV Newcomers & Traditional Automakers. Somewhat surprisingly, the Traditional Automakers saw the biggest momentum gains in our latest tracker—with GM particularly looking strong”
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Diversion: “The Most Memorable Advice of 2022″ – The Atlantic
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