On this episode of KayneCast, Steve Rigali, Executive Managing Director with Kanye Anderson Rudnick, talks with Jon Christensen, Portfolio Manager for the KAR Mid Cap Core Strategy. Christensen discusses how select mega cap stocks drove equities in the Mid Cap Index during Q2.
Mid Cap Stocks Surge After a Sluggish First Quarter
Christensen begins his Q2 stock market review noting the Russell Mid Cap Index performed strongly in January only to see four straight months of negative returns. The March banking crisis aggravated fears of a coming recession. This trend reversed in June with investor anticipation that the Fed may be close to ending its hawkish inflation policy, causing a surge in Mid Cap stocks, led by the Industrial, Consumer Discretionary, and Material sectors.
Overall, the Russell Mid Cap Index skewed towards lower quality names during the quarter, with the Industrial sector performing the best and mega Cap companies capitalizing on the excitement surrounding artificial intelligence. Christensen notes, however, local and global financial entities could continue to see volatility as they move through the year, and this could cause further disruption in equities.
Outlook for the Remainder of 2023
Christensen wraps up his stock market performance review with his thoughts on the coming months. The market continues to deal with uncertainty in the form of the Russia/Ukraine conflict, higher-than-normal inflation, fallout from the banking crisis, and whether the U.S. economy will enter a mild recession. All these factors create uncertainty in equity markets.
Christensen notes that KAR will maintain its goal of finding “solid companies with business models that can react and persevere in reaction to this volatility – high-quality entities that can pass through pricing while maintaining high customer retention through the value-add of their products to its customers.” From his perspective, companies with these characteristics should outgrow their market over the long term and take advantage of any volatility in the market.
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.