On this episode of KayneCast, Jordan Greenhouse, Managing Director with Kayne Anderson Rudnick, explores how the mid cap stocks performed in the last quarter of 2022 with Jon Christensen, Portfolio Manager and Senior Research Analyst for the KAR Mid Cap Core Portfolio. Join them as they review the 2022 stock market performance and look ahead to 2023.
Q4 2022 Ends a Volatile Year for Mid Cap Stocks with Cautious Optimism
Q4 2022 heralded the end of one of the wildest market rides in decades. Every month seemed to produce an additional market stressor, whether it be Russia’s invasion of Ukraine, supply chain disruptions, inflationary pressures, or the series of weather anomalies impacting the drought-ridden western US. While the Russell Midcap Index had five positive months, they were countered by seven negative ones.
Christensen notes in his Q4 2022 stock market review that the market finally provided investors with some positive news. Most important was the growing market consensus that the Fed’s hawkish interest rate hikes appeared to be working and that inflation was likely peaking and beginning to subside. Long-term views of the economy enhanced returns for the Russell Midcap Index, which rose 9.2% during the fourth quarter.
Mid Cap Index Well-Prepared for Possible 2023 Recession
Christensen notes the market expects a recession to begin at some point in 2023, with the main question being whether the economy will have a hard or soft landing. Inflation, supply chain issues, and geopolitics will continue to impact the market in unexpected ways. While there are signs of improvement, Mid Cap stocks could be in for another volatile year.
Despite this, Christensen is optimistic about the Mid Cap outlook over the long term. He notes that KAR’s goal is “to find solid companies with business models that can react and persevere in reaction to these pricing pressures and volatility by creating and maintaining competitive moats. These are companies that can pass through pricing while maintaining high customer retention through the value-add of their products to its customers.” By investing in Mid Cap stocks with solid revenue characteristics, Christensen believes it’s possible to take advantage of current market volatility and remain profitable long-term.
Listen to the podcast to learn more about Mid Cap Core performance in Q4 2022, or read our complete 4Q 2022 Commentary, where KAR CIO Doug Foreman reviews market performance and the good and bad news as we look ahead to 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.