Kim Bolton's Top Picks: February 2, 2022
BNN Bloomberg
Top picks from Kim Bolton, president and portfolio manager of Black Swan Dexteritas
MARKET OUTLOOK:
For a while now, your BSD team believed equity markets seemed to be heading for a “perfect storm” of rising interest rates, shrinking liquidity, escalating inflation, supply chain constraints and rich valuations.
Through December and into the new year, our BSD Global Tech Hedge Fund’s stock portfolio was near fully invested, with an overweight short equity index hedge on the notional value of the stock portfolio that would incrementally grow (from the laddered Nasdaq put options strategy) if/when the stock market would deteriorate from this “perfect storm”.
Really, the market has been talking about supply chains for about two years now and equities have managed to trade higher. U.S. CPI has been above 5 per cent since last May and the market has managed to trade higher.
Russia/Ukraine is definitely dampening sentiment (especially in Europe) but the big change is the U.S. Fed - a more hawkish sounding Powell and the prospect of more/faster rate hikes. The markets have been able to overcome a lot of obstacles in the last few years but the removal of accommodation by the Fed is the toughest one of all.
We are sure the markets will still need to go through more of an adjustment period and expect stock markets to continue to churn and volatility to remain high for the near future. For now, the stock markets are looking at things with a glass half empty approach, meaning it will take a while longer to shake off the negative sentiment.