Fund buyers: Hot or not?
Jennifer Hill • February 3, 2022
Regency Wealth Management in Ramsey, NJ is what associate portfolio manager Mark Andraos describes as ‘cautiously bullish’ on US equities. He puts the firm at ‘about a 60’ on our US equities thermometer.
‘Although valuations are not cheap, US equities are trading at about 21 times forward earnings, which is less expensive than they were pre-pandemic,’ he said.
Over the past year, the firm has incrementally increased its allocation to US equities through hedged equity products. Its global equity portfolio now has ‘a little north of 65%’ in US equities.
Though the economy is on relatively firm footing, Regency finds it difficult to feel hotter given several key headlines that could increase short-term stock market volatility – from the ongoing spread of Covid-19 to possible adverse effects of the Build Back Better framework and the prospect of the Fed implementing earlier and faster interest-rate hikes. However, Andraos said low and rising interest rates have historically been good for equity markets as the economy continues to strengthen.
While technology stocks have had a stellar run, could 2022 be the year the tide finally turns for value stocks?
‘We continue to favor large-cap, well-capitalized companies with strong management that are leaders in their markets, generate superior cashflow, and have clean balance sheets with below-average debt,’ said Andraos.
‘In this vein, we believe that more value-oriented areas of the market will outperform relative to growth, particularly as interest rates continue to climb higher.’