The Lookout | Week of March 07, 2022

Here’s a look at what our network of investment professionals is watching this week:

Major Market Events:

Wednesday, March 9: USD Crude Oil Inventories

Thursday, March 10: EU Leaders Summit, US Core CPI, US Initial Jobless Claims, ECB Press Conference

Friday, March 11: EU Leaders Summit

Matt Ferratusco of Lyons Wealth Management, Portfolio Manager of a tactical allocation strategy

High inflation has proven to not be transitory and is in fact worsening due to a slow recovery in supply chain bottlenecks. A top tail risk fear among market participants has been an overshoot in the Federal Reserve’s loose money policy and decision to let inflation run hot. Such fears were not without merit, as the Fed has made an abrupt pivot and is expected to begin tightening sooner, and in larger increments, than expected.
Market speculation and uncertainty about what policy reversion looks like is changing by the day and leading to wild rotations within equity market sectors, as well as an interest rate backup and bearish curve flattening. These are uncertain times in markets in which protection mechanisms on equity allocations are critical.

Simon Lack of SL Advisors, Portfolio Manager of an energy infrastructure fund

Tighter energy prices are likely to constrain growth in the months ahead, while also boosting inflation, complicating the Fed’s choices.
A ban on imports of Russian crude looks likely, although the Administration is unlikely to shift their energy policy before the midterm elections, which means US consumers shouldn’t expect much relief from high prices.
The outlook for US midstream energy infrastructure was unambiguously good before Russia invaded Ukraine. Now Germany will lead Europe in diversifying its energy supplies, which is good for US exports of natural gas.

Eric Clark of Accuvest Global Advisors, Portfolio Manager of a consumer-oriented fund

Markets are dealing with an epic degree of uncertainty across macro data, potential earnings misses going forward, Fed rate hikes and the uncertainty around quantitative tightening, and geopolitics.
In times like this, company fundamentals matter less as a broad risk-off mentality takes hold. Here’s the rub, company fundamentals, secular trends, and growth of earnings and free cash flow ultimately drive the performance of stocks. Looking out further than the current noise, we see a clear opportunity in a major mega-trend within the asset management and financial services industry.

Thank you for reading The Lookout. Come back next Monday for more insights on what investors can expect in the markets.