Trends Watch: Investing in Liquid Stocks
- Apr 27, 2023
EisnerAmper’s Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring the views and insights of executives from alternative investment firms. If you’re interested in being featured, please contact Elana Margulies-Snyderman.
This week, Elana talks with Jean Josse, CIO, GlassBead Capital Management.
What is your outlook for investing in liquid stocks?
We are now 14 months into a bear market which is about average duration. It’s my view that the bear market bottomed on October 14 of last year. That day happened to coincide with the highest inflation reading of this entire cycle. The main fundamental factor which drove the market down in 2022 was the inflation crisis. I believe that is in the rearview mirror and liquid stocks are going to create a very good opportunity this year.
Where do you see the greatest opportunities and why?
2022 was the worst year for growth stocks in a very long time. The Federal Reserve, in order to combat inflation, raised rates at the fastest pace ever and this created a major headwind for growth stocks. Growth stocks such as Tesla and Meta corrected 75%. I believe that we can see a massive mean reversion this year as the Federal Reserve slows the pace of interest rate hikes and likely terminates their rate hikes sometime in Q2. As the economy slows, the biggest benefactor will be companies which are growing much faster than the general economy. Here is where lies the greatest opportunity as there are major technology disruptors who are creating new products and services.
Where do you see the greatest challenges and why?
The pandemic saw an unprecedented amount of monetary and fiscal stimulus in order to save the economy from a depression. The consequence of this was inflation which we have been experiencing over the last year. The risk is that inflation remains stubbornly high which causes the Federal Reserve to raise the FED fund rate beyond 5.5%. This would create a major headwind for stocks and likely put the economy into a recession.
What keeps you up at night?
That a country somewhere in the world may find that it has backed itself into a corner and use nuclear weapons to free itself.
The views and opinions expressed above are of the interviewee only, and do not/are not intended to reflect the views of EisnerAmper.
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Elana Margulies-Snyderman is an investment industry reporter and writer who develops articles, opinion pieces and original research designed to help illuminate the most challenging issues confronting fund managers and executives.
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