Equity markets have enjoyed a strong start to the year in 2024. We are cautiously optimistic about the outlook and several of the managers we work with are sounding more bullish. We would generally agree, but we also recently added options to our equity pool that would provide some protection through the end of this year. We have had a good gain and we believed it was a good time to protect some of that gain.
To get a better sense of the bullish view, we thought many clients would find these abridged comments from David Fingold, one of the fund managers with Dynamic Funds in our QW Enhanced Select Global Equity Pool, interesting.
“In retrospect, the year 2023 served as a testament to the unpredictability of financial markets and the necessity of adapting investment strategies accordingly.
One of the primary takeaways from 2023 was the debunking of the widespread belief in an impending recession. Despite prevalent consensus, the year did not witness the anticipated downturn, challenging conventional wisdom and underscoring the importance of maintaining an open mind towards investment opportunities.
Fingold suggests there is a growing confidence in a secular bull market, drawing parallels with historical periods of sustained market growth. While acknowledging the inevitability of cyclical downturns, he underscores the prevailing dominance of large-cap stocks, the outperformance of the U.S. market over international counterparts, and the superiority of equities over commodities.
Fingold draws parallels with the market landscape of 1994-95, citing similarities in the Federal Reserve's monetary policy and shifting market dynamics. Despite geopolitical uncertainties and potential disruptors, he remains bullish, citing favorable economic indicators such as subdued inventory levels in key sectors.
In terms of sectoral positioning, he is overweight Information Technology (IT) and industrials sectors. While acknowledging the significance of the IT sector's market weight, he advocates for a cautious approach given its recent strong performance. Similarly, he identifies industrials as an area of interest, particularly in segments such as commercial aerospace and electrical equipment, driven by pent-up demand and nearshoring trends.
He points the resurgence of financials, attributing their revival to the Federal Reserve's shift towards a neutral stance. He highlights opportunities in investment banking and asset growth, underscoring the potential for capital markets banks to capitalize on favorable market conditions.
In the healthcare sector, Fingold addresses the challenges faced in 2023, emphasizing the resilience of companies poised to benefit from demographic shifts and therapeutic innovations. He remains optimistic about the sector's prospects, citing the resilience of key players like Eli Lily and Novo Nordisk, and underscores the importance of active management in identifying and capitalizing on emerging opportunities.
As investors look ahead to 2024, Fingold's reflections serve as a timely reminder of the opportunities and challenges that lie ahead, guiding prudent decision-making and strategic allocation of capital in pursuit of optimal returns.”
