On this episode of KayneCast, host Jordan Greenhouse, Managing Director of Kayne Anderson Rudnick, discusses the Q2 2022 stock market review with guest Jon Christensen, Portfolio Manager and Senior Research Analyst for KAR Mid Cap Core, focusing on market pressures and the specter of a possible recession.
Q1 Drivers Continue to Impact the Mid Cap Stock Index
Q1 2022 was, to say the least, eventful. Omicron, supply chain issues, and the invasion of Ukraine by Russia disrupted the market. Hopes that Q2 would be more mundane were dashed by a continuation of Russia-Ukraine hostilities, high inflationary pressures, and an aggressive response to inflation from the US Federal Reserve. By the end of Q2, the market began bracing for a possible recession in the year’s second half.
Q2 2022 Mid Cap Equity Performance Review
Despite ongoing market volatility, Q2 looked more like a “typical” weak market, with lower quality stocks underperforming. While negative on an absolute basis, Energy still outperformed on a sector basis versus the overall Mid Cap Index.
Christensen notes that the KAR Mid Cap Core Portfolio has experienced a gain on relative performance since the beginning of the year and he believes it is “well-positioned for economic volatility given our ongoing emphasis on seeking structurally sound businesses that, in our view, should outgrow their market and peers over the long-term while maintaining solid competitive positions.”
The Mid Cap 2022 Stock Market Outlook
Christensen expects the same drivers which rocked the market in Q1 and Q2 to continue into Q3 2022. Inflation, supply chain issues, and the ongoing Russia-Ukraine war will continue to cause uncertainty and volatility — especially when considered alongside recession fears.
Despite these factors, Christensen remains optimistic. He notes KAR’s “goal is to find 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” and that by continuing to seek out high-quality businesses that will outgrow their markets over the long-term, the KAR Mid Cap Core Portfolio can take advantage of the 2022 market’s ongoing volatility.
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 strategy for Q2 2022.
Learn more about the 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.