In this episode of KayneCast, Managing Director Jordan Greenhouse and Jon Christensen, Portfolio Manager of the KAR Mid Cap Core strategy, discuss how market forces impacted Mid Cap stocks in Q1 2023.
A Volatile Start to 2023
Q1 saw markets change rapidly, with January starting in positive territory. Investors remained convinced the U.S. economy would enter a recession in 2023, but the consensus was that a recession’s effects would be mild. The Russell Mid Cap Index increased 8.3% in January, despite concerns over Fed’s hawkish interest rate policy. After the rollercoaster ride of 2022, January 2023 suggested the beginnings of a recovery.
February, however, saw markets slow. Inflationary concerns were the primary cause, as economic data suggested that the Fed would raise interest rates higher than expected and maintain high rates for longer than initially forecasted. The Russell Mid Cap index fell by 2.4% but remained higher than at the beginning of the quarter.
Then March gave markets an unexpected shock with the rapid collapse of Silicon Valley Bank and Signature Bank. Concerns ran high that the failure of the two banks indicated a larger crisis in the banking sector, which led to renewed fears of a hard landing. Swift regulatory action helped alleviate these fears, but as Christensen notes, “local as well as global financial entities could continue to see some volatility as they move through the year.” which could result in additional disruptions in the equities market.
Mid Cap Stocks Finish Strong Despite Lingering Concerns
Despite an uneven three months, the Russell Mid Cap Index finished Q1 2023 up 4%. The KAR Mid Cap portfolio gained momentum this quarter due to a flight to quality triggered by the banking crisis. Christensen emphasized KAR’s focus remains on seeking out high-quality businesses that have the potential to outgrow their markets over the long term.
Listen to the podcast to learn more about Mid Cap performance in Q1 2023, or read our complete Q1 2023 market review where KAR CIO Doug Foreman reviews market performance and provides an outlook for what’s ahead in 2023.
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.