We believe that there are significant reasons to believe that the post-pandemic recovery may be nearer, and could be stronger, than consensus expectations. Market rotations will be ongoing, creating volatility for affected sectors and industries. Investors can either approach these rotations tactically, or simply maintain exposure to their chosen themes or to broader indices. For the tactically minded, the rotation has recently again begun to favor some cyclical themes, including commodities, industrials, and small caps. This rotation may or may not be enduring. If the above thesis of a more rapid arrival of herd immunity is correct, we anticipate cyclical and small cap stocks will outperform. Given the overall economic and market conditions, we believe it would be premature to count out the growth areas that have run so far since the pandemic bottom in March. Certainly, tactical traders could take profits and explore positions in the rotation beneficiaries.
Longer-term, a barbell approach makes sense to us: risk assets, skewed towards growth or cyclical (your choice), on one end; and precious metals on the other. Both, we believe, have the potential for significant appreciation in the current environment and in the environment that seems likely to unfold in the next several years.
As the November elections get closer, we’ll begin considering some tactical decisions that investors could make based on current polling, and start to evaluate winners and losers in the event of various outcomes.
Thanks for listening; we welcome your calls and questions.
