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Positioning in a World of Higher Inflation

Positioning in a World of Higher Inflation

Global Dividend Yield Review of the Fourth Quarter of 2021 | KayneCast 174

January 25, 2022

In this episode of KayneCast, we talk to Richard Sherry, portfolio manager of KAR’s global dividend yield strategy, to see what we can expect for the market in 2022.

Continued Uncertainty in Global Markets

Lower quality equities led the first half of 2021, with fundamentals becoming more of a focus in Q3 and Q4. As Sherry notes, “Despite all of the economic improvement that we’ve seen since economies bottomed due to Covid, there remains a degree of uncertainty in the global economy.” This uncertainty is driven by inter-related factors, including stronger than usual demand, supply chain disruptions, and monetary and fiscal stimulus programs set to expire early in 2022. China’s zero-Covid policy continues to put pressure on supply chains and delay eventual recovery.

These factors have driven inflation higher than it has been in several years. Whether this rise is transitory or persistent is unclear. This uncertainty is likely to result in higher interest rates in 2022.

Key Contributors and Detractors to the Global Dividend Yield

Listen to the podcast above to learn more about the top 5 contributors and detractors in KAR’s Global Dividend Yield strategy for Q4 2021.

Interest Rate Expectations for 2022

While the emergence of new Covid variants remains a concern, inflation and interest rates are expected to have the most significant influence on global dividend funds in 2022. The Federal Reserve is expected to increase rates two to four times this year. Sherry believes that “a diversified portfolio that includes businesses that stand to benefit from higher interest rates, such as banks and insurance companies, as well as companies that are well-positioned in a world with higher inflation, such as specialty chemical companies” may help to offset the possibility of higher interest rates negatively impacting higher-yielding stocks.

 

Learn more about our global dividend yield portfolio today. 

 

 

DISCLOSURE

This information is being provided by Kayne Anderson Rudnick Investment Management, LLC (“KAR”) for illustrative purposes only. Information contained in this material is not intended by KAR to be interpreted as investment advice, a recommendation or solicitation to purchase securities, or a recommendation of a particular course of action and has not been updated since the date of the material, and KAR does not undertake to update the information presented should it change. This information is based on KAR’s opinions at the time of the recording of this material and are subject to change based on market activity. There is no guarantee that any forecasts made will come to pass. KAR makes no warranty as to the accuracy or reliability of the information contained herein.

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