On this episode of KayneCast, Richard Sherry, Portfolio Manager and Senior Research Analyst for the KAR Global Dividend Yield discusses the state of the Global Dividend Yield Portfolio with Jordan Greenhouse, Managing Director of Kayne Anderson Rudnick.
Inflationary Pressures Replaced by Recession Fears in Q2 2022
In the first quarter of 2022, supply chain disruptions and inflationary pressures impacted global high dividend yield market. While these drivers continued to have an impact in Q2, concerns about a possible recession were more prominent and there are concerns that the US Federal Reserve’s aggressive interest rates in Q2 — intended to control inflation — will contribute to a recession.
Furthermore, the ongoing Russia-Ukraine conflict continues to have an impact on markets. The war has become a long-term battle of attrition with impacts on both global energy markets and the European economy. Finally, China’s strict zero COVID policy continues to disrupt global supply chains and pressure global demands.
Q2 2022 Stock Market Performance Review
While many strategies did not perform as well in the first half of 2022, the KAR Global Dividend Yield Portfolio outperformed the benchmark. Sherry notes, “this is typical for the Global Dividend Yield portfolio in times of weak markets and concerns about the economy.” Sherry highlighted that the businesses in the portfolio are mature businesses such as consumer staples, utilities, healthcare, and telecom companies, which tend to hold up well in tough economic environments.
The Q3 2022 Stock Market Outlook
While inflation and interest rate hikes will continue to be important factors during Q3 2022, the potential for a recession is the primary concern as the markets move into the second half of the year.
Sherry remarks that the KAR Global Dividend Yield Portfolio seeks to own businesses that have historically performed well during recessions and that KAR is “aware higher interest rates can sometimes be negative for higher-yielding stocks. As a result, we have sought to construct a diversified portfolio that includes businesses that benefit from higher interest rates, such as banks and insurance companies, as well as companies we believe are well positioned in a world with higher inflation, such as specialty chemical companies.” He believes the portfolio is well positioned to ride out the negative effects of a recession.
Global Dividend Yield Contributors and Detractors
Listen to the podcast above to learn more about the top contributors and detractors in KAR’s Global Dividend Yield strategy for Q2 2022.
Learn more about the Kayne Anderson Rudnick Global Dividend Yield today.
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.