Jason Mann's Top Picks: November 26, 2021
BNN Bloomberg
Top picks from Jason Mann, chief investment officer at EHP Funds
MARKET OUTLOOK: Markets continue to rally, looking through the resurgence of COVID in some countries, backstopped by supportive central banks and ongoing fiscal stimulus from the Biden administration.
Earnings have also been stellar, doing their best to catch up to some historically high valuations. Fund flows into equities are very strong, and corporate buybacks have returned in force.
Central banks are now dealing with a different problem: inflation. While some of the problems are supply chain related, the reality is that demand for products and labour is far outstripping supply.
We think resurgent COVID won’t slow re-openings much, particularly in large economies like the U.S., which continue to take a “plough forward” approach overall. The other reality is that case counts are the less important measure than hospitalizations.
That, coupled with fiscal stimulus, is leading to a “transitory for longer” environment for inflation. So much so, in our view, that the real risk currently is “stagflation” where inflation increases as growth slows from its peak.
In a stagflation environment, you want a barbell approach of stocks that benefit directly from inflation: commodities and related businesses, as well as high-quality, larger-cap, low volatility stocks with strong earnings growth (as opposed to speculative top-line growth).
