Written By: James P. O'Mealia - Head of Equity Portfolio Management
Published: March 9, 2018
Most equity oriented accounts registered losses for the month of February as stocks fell sharply due to worries about higher interest rates, accelerating wage inflation and higher raw materials and other costs for businesses.
There was seemingly no place to hide in February as stocks of all sizes fell and no economic sector was pared in the rout. What is most surprising is the fact that technology issues held their ground better than most and continue to outperform the broad market. As such, diversified active investment managers and especially value managers continue to struggle to keep up with the market averages. Thankfully, Main Street is doing better than Wall Street and the economic news continues to paint a picture of solid growth. While some industries are facing margin pressures from higher inflation pressures noted above, on balance the business climate remains constructive and on the improve. As such, job growth continues, wage gains are accelerating, housing values are rising and consumer confidence remains strong. Even though higher interest rates have caused mortgage rates to jump, demand remains strong for new and used homes and the lack of supply continues to restrict housing growth. The newly-passed tax law will create winners and losers, but overall, the majority of consumers come out ahead and will have greater take home pay. Businesses will benefit to a greater extent as the tax law sharply reduces tax rates and much of the improved profits will flow to workers and shareholders of these companies. Therefore, while we have entered into a period of greater equity market volatility, we must continue to focus on economic fundamentals and the risk/reward of individual investment opportunities. Uncertainty over tariffs for steel and aluminum have heightened investor anxiety, but, should not cause the economic engine to slow in the short-to-intermediate term.
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Granite Springs Asset Management, LLC
All investing is subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit nor protect against a loss. Past performance may not be indicative of future results.