Varun Anand's Top Picks: March 2, 2022
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Top picks from Varun Anand, vice president and senior portfolio manager, Starlight Capital
MARKET OUTLOOK:
The recent invasion of Ukraine by Russia has further elevated uncertainty in the market. While it is difficult to predict geopolitics and how events will unfold over the coming months, it is clear volatility will remain elevated.
Financial conditions will continue to tighten globally, however the pace and magnitude of rate hikes is likely to slow down, as central banks evaluate the economic impact of the Ukraine crisis. Surging commodity prices, coupled with supply chain disruptions and economic sanctions on Russia, will result in slower growth globally, while inflation will remain elevated.
In this environment, investors should focus on allocating capital to companies with resilient demand profiles and inflation protection; this is precisely where infrastructure equities shine.
In the current macro environment, we do not anticipate a material demand impact on infrastructure equities, particularly those providing mission-critical services (ie waste collection, electricity, water, internet).
In addition, many infrastructure businesses structure their contracts to include inflation pass-through or CPI-linked escalators, which limit the impact of higher inflation on cash flow and earnings growth.