Presenters: Lowell Pratt, CFA, Andy Pratt, CFA, CAIA, and Adam Newman, CFA, CFP®, RICP®
Here is the webinar recording from January 17th, 2023. You can browse topics discussed and main takeaways using the sections and time stamps below:
Click the time-stamp in each section title, and you will jump right to that part of the video in a new screen!
Introduction and Current Events (00:00)
- Overview of asset class returns for the year.
- Mention of the strong finish for equities in Q4, leading to overall robust yearly returns.
- Discussion on the rally in bonds salvaging what could have been another poor year for fixed income.
- Anticipation of election news overshadowing inflation as a major focus for investors.
- Speculation on the potential impact of a Biden-Trump rematch on the investment climate.
Quarterly Market Summary (01:36)
- Strong close to the year across various asset classes and global markets.
- Acknowledgment of the volatility throughout the year despite double-digit gains.
- Recovery in real estate in Q4 due to interest rate fluctuations.
- Historical perspective on market returns and the non-linear nature of gains.
Long-Term Market Summary (04:37)
- Strong close to the year across various asset classes and global markets.
- Acknowledgment of the volatility throughout the year despite double-digit gains.
- Recovery in real estate in Q4 due to interest rate fluctuations.
- Historical perspective on market returns and the non-linear nature of gains.
Returns During and After US Election Years (08:38)
- Analysis of market performance in pre-election and election years.
- Historical data showing market performance aligns with long-term averages regardless of election timings.
- Emphasis on the minimal long-term impact of elections on market performance.
Annualized Returns During US Presidential Terms (10:38)
- Review of market returns during various presidential administrations over the last century.
- Observation that market returns during different administrations align with long-term equity market averages.
- Conclusion that presidential terms have limited long-term impact on market performance.
2023 Stock Market Performance (11:54)
- Focus on the 'Magnificent 7' tech companies driving market returns.
- Discussion on the disproportionate influence of these large companies on market cap-weighted indexes.
- Contrast between market cap-weighted and equal-weight index performance due to these companies.
Small Caps Lagged During Stock Market Recovery (17:14)
- Commentary on the lag in performance of small-cap stocks during the market recovery.
- Contrast between large-cap and small-cap stock recoveries post the 2022 bear market.
- Insight into the atypical nature of small caps lagging in a recovery phase.
Looking Ahead: The Case for Small Caps (18:39)
- Observation of current market trends indicating a positive shift towards small-cap stocks.
- Anticipation that small-cap stocks will gain favor, especially in a long-term market phase.
- Noting that small-cap stocks currently present a valuation advantage compared to large caps.
- Suggestion that the underperformance of small caps in recent times sets the stage for potentially higher future returns.
The Short- and Long-Term Trends Both Favor Small Companies (19:36)
- Both short- and long-term trends are leaning towards better performance of small companies.
- The recent end-of-year rally suggests a positive trend for small caps.
- Reference to historical market phases where small caps have typically led the recovery.
Smaller Companies are Undervalued (20:17)
- Smaller companies are seen as undervalued when compared to their larger counterparts.
- Significant differences in valuation between market cap-weighted and equal-weight indices.
- This undervaluation presents a potential opportunity for investors to capitalize on.
- Current market dynamics suggest a favorable environment for investment in small companies.
Stock Selection Opportunity Outside of Magnificent 7 (21:39)
- Emphasis on the potential of investing in companies beyond the dominant seven tech firms.
- Discussion of the effectiveness of Burney ratings throughout 2023
Client Q&A Session (25:15)
- Audience questions cover a wide range of topics from economic concerns to investment strategies.
- Speakers provide insights into the current state of the economy and markets.
- In-depth discussion on the role and outlook for cryptocurrencies and gold in investment portfolios.
- Addressing how global conflicts and geopolitical uncertainties might impact investment strategies.
Why Goldman Worries Less About Growth Risks (52:41)
- Presentation of Goldman Sachs' research indicating a less worrisome outlook on growth risks.
- Economic data points are more favorable than commonly perceived.
- Despite current challenges, long-term growth expectations are still positive.