Geopolitical Pressure and Central Bank...

Geopolitical Pressure and Central Bank Tightening Impact Small Cap Investing in Q2 2022

International Small Cap Review of the Second Quarter of 2022 | KayneCast 196

August 5, 2022

On this episode of KayneCast, Jordan Greenhouse, Managing Director with Kayne Anderson Rudnick, meets with Craig Thrasher, Portfolio Manager and Senior Research Analyst for the KAR International Small Cap Portfolio. Thrasher provides insight into the impact of geopolitical influences on the International Small Cap Portfolio in Q2 2022 and offers insightful stock market commentary for the upcoming third quarter.


Macroeconomic Shocks Affect International Small Cap Performance in Q2 2022  

The Russian invasion of Ukraine impacted international stocks in Q2. Europe’s over-reliance on Russian energy caused energy prices to spike when international sanctions went into effect. The resulting negative economic impact significantly affected international investing, with underperforming European and UK stocks.

Central bank tightening also caused a strong sell-off in higher growth, higher multiple stocks. As Thrasher notes, “This is basically a reversal of what we’ve seen over the last two years or so when we’ve had very accommodative central bank policy.”

Thrasher notes that a reactive response to these macroeconomic shocks can overly punish individual companies. He comments there “are a number of companies that we own in Europe that we believe have structural growth drivers that will allow them to grow for many years irrespective of what may be a tough economic environment over the short term. So, in these instances, we’ve been able to increase our positions at prices that we think are quite attractive.”


Q3 2022 International Small Cap Outlook

Moving into Q3 2022, Kanye Anderson Rudnick’s International Small Cap investing strategy remains unchanged. Market volatility and uncertainty create opportunities to invest in great businesses at attractive valuations.

Listen to the podcast above to learn more about the top contributors and detractors in KAR’s International Small Cap Portfolio for Q2 2022, and join us in Q3 for another market performance review.

Learn more about the Kayne Anderson Rudnick International Small Cap Portfolio 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.

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