In this episode of KayneCast, Jordan Greenhouse, Managing Director of Kanye Anderson Rudnick, talks with Richard Sherry, Portfolio Manager and Senior Research Analyst for the Global Dividend Yield strategy. Sherry provides an overview of the market forces affecting the Global Dividend strategy in Q3 2022 before discussing the Q4 2022 stock market outlook.
2022 Markets Marked by Historic Volatility
The first half of 2022 saw volatile market forces shift rapidly, with key drivers including everything from supply chain disruptions and inflationary pressures to the war in Ukraine and a potential recession. Fears of a recession, which dominated the second quarter, appeared to wane in the early part of Q3, only to resurface when data indicated interest rates would continue to rise.
Sherry notes the Federal Reserve is willing “to stomach a recession in order to get inflation under control.” While the Fed hopes to create a soft landing, the market worries it will overshoot the mark and instead create a significant recession. A strong employment environment complicates the Fed’s ability to achieve its objectives, raising concerns of the type of wage-price spiral last seen in the 1970s.”
Geopolitics continued to impact the Global Dividend Yield market during Q3 2022. What most analysts expected to be a short conflict between Russia and Ukraine has entered a protracted phase, pressuring both the European economy and global energy markets. Finally, global markets continue to face the aftereffects of the COVID pandemic, with China’s aggressive zero-COVID policy impacting supply chains.
Preparing for a Potential Recession in Q4 2022
When asked about the Q4 stock market outlook, Sherry emphasized the need to focus on a potential recession and higher interest rates. The possibility of a recession requires careful monitoring of businesses in the Global Dividend Yield strategy, with an emphasis on resilient business models, strong balance sheets, and a history of performing well in recessions.
Higher interest rates can “be negative for higher-yielding stocks.” While a concern, the Fed’s plan to return inflation to a two percent target should result in lower interest rates in the future, and Sherry believes that higher-yielding stocks should recover.
Listen to the podcast above to learn more about Global Dividend Yield strategy performance in Q3 2022, and join us in Q4 for another stock market performance review.
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. Past performance is no guarantee of future results.