Article 2 of 5: 1st Quarter Commentary

For 2022, we’re focused on Interest Rate Policies, Stock Valuations, and Investor Sentiment.  

Economic growth appears healthy, as all leading indicators remain firmly positive, and corporate earnings growth should remain strong.  However, the page is turning on the historically low-rate environment that allowed every type of asset to become overvalued.   

As attractive returns weren’t available in traditional bonds, investors turned to some of the riskiest areas of the market.  From stocks to Special-Purpose Acquisition Companies (SPACs) to NFTs, to art and real estate, money piled into anything displaying price momentum.  In the process, relative valuations of these assets are incredibly high. Now the backdrop is changing.   

Investor sentiment is shifting focus to quality. As we transition to slower growth, higher inflation, and rising rates, “Deep Moat” companies with earnings power will outperform those who relied on easy money to finance growth.  This bodes well for high quality portfolios, like our Dividend Growth Strategy.

To read the rest of this series, including tactical ideas, click here.

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