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Equities
Major policy changes, political events, global economic developments and emerging market trends can create implications for investment opportunities across sectors. Our analyses on equities offer perspectives to help you get a better pulse on the market.
Given recent market volatility following events in the U.S. banking system, we wanted to provide you with our outlook and how Fort Washington is positioning Focused Equity portfolios.
The policy shift that is occurring is an opportunity to test the precepts of Keynesian economics that embrace the government’s role in the economy versus supply side policies that favor tax cuts and deregulation.
Positive news surrounding the COVID-19 vaccine rollout has led to a rally in oil prices, which were up 75% from November of 2020 through March of 2021. With questions about demand lingering, Saudi Arabia announced a surprise reduction in oil production. OPEC+ has stated that they support a reduction of global oil inventories, which is expected to provide a tailwind for oil markets going into the first half of 2021. Now, we wonder, is another commodity super cycle next?
We believe value investing, properly applied with a forward-looking framework, continues to have a bright future regardless of whether the value or growth factor leads going forward.
The five largest U.S. stocks returned 35% YTD as of late July, compared with minus 5% for the remaining stocks in the S&P 500 index, and the outperformance of this select group has resulted in a large valuation premium for them relative to the rest of the market. This has caused some investors to worry the market is on shaky ground. We believe a replay of the tech bust in 2000 is unlikely; however, the risk-reward trade-off for these stocks has become less favorable as they have become a “crowded trade.”
Fort Washington's Multi-Asset approach overcomes shortcomings associated with traditional balanced stock/bond portfolios while adding value through active management. Improper measurement of risk and an inability to actively allocate risk can yield disappointing results, and the COVID-19 crisis is the latest example of this. Fort Washington employs two proprietary tools designed to overcome this.
OPEC is being reborn, and despite the tremendous drop in demand for oil and oil products, long-term fundamentals for oil have improved as the price of the commodity has collapsed. Allocating to high quality oil-exposed equities is beginning to look like a compelling opportunity for long-term investors.
OPEC is being reborn, and despite the tremendous drop in demand for oil and oil products, long-term fundamentals for oil have improved as the price of the commodity has collapsed. Allocating to high quality oil-exposed equities is beginning to look like a compelling opportunity for long-term investors.
Small businesses have been significantly affected by the lockdown due to the coronavirus pandemic. The federal government has prioritized these businesses, passing a second bill supplementing the Paycheck Protection Program (PPP). However, opinions on PPP vary. In the first quarter, many larger cap stocks outperformed small cap stocks, but small caps have shown signs of recovery.
Small cap stocks have generated attractive investment returns over the long term. In addition, the profitable segment of small cap stocks has outperformed unprofitable small cap stocks with significantly lower volatility over time. The Fort Washington Small Company Equity strategy only invests in profitable small cap stocks, avoiding unprofitable small cap stocks and reducing the risk levels of investing in small cap stocks.
Jamie Wilhelm, Craig Dauer, Dan Gibson, Jason Ronovech, Andrew Boczek, Austin Kummer
The coronavirus situation continues to evolve rapidly, and the full impact of the virus is unknowable at this point. Odds are high that volatility will continue, and our equity managers break down what this means for Fort Washington’s equity strategies.
Our latest white paper explains our belief that small cap stocks are an inefficient asset class and that the key to capitalizing upon these inefficiencies is through the application of a consistent, differentiated approach that focuses on downside risk.
Small cap stocks have generated attractive investment returns relative to other asset classes and stock market capitalization segments over time. We offer a look at inefficiencies within the asset class and drivers of small cap returns.
Plunging bond yields and heightened stock market volatility have caused investors to worry. Our view is a further slowing of the economy is likely, but we do not yet see signs of recession.
In July, FERC offered up another surprise to the MLP market, after already causing turmoil in March when, during market hours, they announced a major policy change.
It is important that value investors consider high quality companies with growth prospects that are protected by barriers to entry.
Equities
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