John Lobb

Insync Funds Management (Insync) has released an industry white paper Will the second half and beyond for equities be different to the first? (the White Paper) which provides a data-based case for a more positive outcome for equities in the second half of 2022 than many industry commentators are currently predicting.

In an introduction to the White Paper, Insync Portfolio Manager, John Lobb, said that despite the present barrage of bad news and sustained focus on the negatives, there are more compelling facts, trends and activities that mean things may not pan out as negatively as is currently being predicted.

“The economy continues to evolve and there is little doubt that the last two years will cause a further change to its operating rhythms,” Mr Lobb said. “However, even though the economy is complex, industry participants tend to rely upon a few favourite data points to figure out the future. Additionally, the focus of commentators tends to coalesce around the consensus view of an issue. We argue that this kind of approach is fraught with danger.”

The White Paper looks at the five common assertions that tend to stir up worry and pessimism that are often used as a basis to alter present portfolios.

“We respond to each of these assertions with a counter view backed up by facts and observations critical to the likely future outcomes of each assertion,” Mr Lobb said.

The five assertions include:

1. Carbon energy prices will keep rising – our analysis reveals that prices are not likely to either significantly increase or decrease for the next year or so
2. Global transport costs have skyrocketed, forcing supply chain cost increases – the evidence suggests shipping cost price hikes were mainly Covid-related
3. Reshoring back to the West means higher prices – mostly the evidence is no, surprisingly not. It comes down to what’s being re-shored (incl. near-shored), and most goods are mainly higher-value complex goods (eg technology)
4. The US economy is heading for a major recession – the market suggests the US economy is unlikely to contract to the degree it did during the 2020 pandemic lockdowns, the 2008/09 GFC or the early 2000’s recession
5. The big one: interest rates. The resumption of rising rates is firmly established – so far, markets have suffered a valuation de-rating, from fear of consistent high interest rates. Equity markets have a lot more upside risk than downside risk when factoring in interest rates.

“We believe that 2022 could well be, once again, a game of two very different halves,” Mr Lobb said. “Allocating away from equities as a result of the present consensus may be the ‘risk-On’ call, resulting in a performance drag.”

Read the White paper.

The post Insync upbeat on equities in second half appeared first on AdviserVoice.