In this episode of KanyeCast, host Jordan Greenhouse and Jon K. Christensen, Portfolio Manager and Senior Research Analyst for the KAR Mid Cap Core Portfolio, provide a stock market performance review for Q1 2022, examining the impact increased volatility had on mid-cap stocks and consider what ongoing market stressors mean for the 2022 stock market outlook.
Q1 2022 Stock Market Review
The first quarter of 2022 saw significant market volatility leading to overall flat to negative returns across most equity classes. The emergence of the Omicron variant in late 2021 delayed a much-anticipated post-pandemic economic recovery, and inflation was high as the economy continued to deal with the fallout from COVID-related supply chain disruptions. When Russia invaded Ukraine on February 24, 2022, the resulting spike in oil and other key commodities due to unprecedented international sanctions added to both supply chain disruptions and inflationary pressures.
Christensen notes “All of these issues generated negative returns in both the equity and fixed income markets.” He reports that “Large caps outperform small caps in the quarter due to the volatility we saw. Growth stocks were weakened by the technology downturn we saw in the first part of the year,” but the energy sector had a historically good quarter, with utilities, materials, and consumer staples also performing well.
Moving into Q2 Feels Like Deja Vu
Looking forward, Christensen notes that Q2 2022 feels like Q2 2021, with hopes the economy will soon be in growth mode. However, inflation, supply chain issues, and the Russia-Ukraine war have added a level of unpredictable volatility to the mid-cap segment of the market, and some investors will scramble to chase performance or avoid losses.
Despite this volatility, Christensen continues to believe in KAR’s strategy of finding “those businesses that have temporary valuation disconnects that we can take advantage of while riding out the ups and downs of the market by having stocks that can persevere during these uncertain periods.”
Mid Cap Core Contributors and Detractors
Listen to the podcast above to learn more about the top contributors and detractors in KAR’s Mid Cap Core strategy for Q1 2022.
Learn more about Kayne Anderson Rudnick Mid Cap Core 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.