Ryan Bushell's Top Picks: October 14, 2021
BNN Bloomberg
Top picks from Ryan Bushell, president and portfolio manager, Newhaven Asset Management
MARKET OUTLOOK:
The worst global pandemic in a century seems to finally be retreating in most regions, a welcome development following the brutal delta variant driven wave. Vaccines have thankfully stood up to the test of broad reopening initiatives, but it remains to be seen how the colder winter months will play out alongside potentially waning vaccine efficacy.
One would think that the pandemic’s retreat would be universally positive for the global economy, but we have a murkier picture developing. The last 18 months of coordinated global stimulus was like a break wall standing up to an economic hurricane. Only as the storm recedes can we properly survey the damage and begin to make repairs.
At present, it appears the damage is significant and will take years, if not decades, to repair. Central bankers have an even tighter needle to thread with regard to withdrawing stimulus (raising interest rates) given how much more leveraged governments, consumers, and asset markets are relative to the aftermath of the 2008-2009 financial crisis, but at the same time they cannot allow inflation to spiral out of control.
I remain cautious on the next 6-12 months for broad equity market indexes given elevated prices for many sectors relative to economic fundamentals. Fortunately, at Newhaven, we do not own the areas of the stock market most exposed to an economic slowdown. Our portfolio has significant exposure to the global energy market as nearly 50 per cent of our portfolio holdings are involved in the production, transportation, and distribution of energy in various forms.
Although the great majority of our exposure to the global energy market is infrastructure based and not sensitive to commodity prices, a renewed focus on this critical sector is beneficial for our portfolio as valuations are now beginning to better reflect fundamentals.
