Jon Christensen, Portfolio Manager and Senior Research Analyst for the Kayne Anderson Rudnick Mid Cap Core, joins Managing Director Jordan Greenhouse on this episode of KayneCast. Together, the two discuss how market factors impacted Mid Cap Stocks in Q3 2022 and what to expect from the Mid Cap stock index in the fourth quarter of an exceptionally volatile year.
Russell Mid Cap Index Leans Towards Lower Quality in Q3
“Volatile” has been the buzzword for 2022 stock market, and the year’s trend towards unpredictability continued in Q3. The Russell Mid Cap Index saw some relief in July, increasing almost 10 percent. August saw a three percent drop — as is typical for the month — then September dropped by 9.3 percent.
Concerns about the Ukraine/Russia conflict, inflationary pressures, and continued fears of a coming recession all contributed to market uncertainty in Q3. Only the Energy and Industrial sectors held positive. Christensen notes in his stock market review that Mid Caps “skewed towards lower quality in the quarter overall when looking at statistics including Beta and Balance sheet strength. So, the volatility in the market we saw showed up in the lower quality names doing better – which is historically what has happened.”
Q4 2022 Mid Cap Outlook and Concerns Over a Weak Market
Christensen takes a cautious view in his Q4 2022 Mid Cap outlook: “inflation and supply chain issues continue to impact markets and the ongoing Russia-Ukraine conflict has only added to the uncertainties and enhanced volatility. The Fed has continued to ratchet up interest rates to control the speed of inflation while trying to not trigger a hard landing recession.”
Despite these concerns, Christensen believes KAR’s Mid Cap strategy is well-positioned to ride out market turbulence. Christensen notes that KAR’s Mid Cap strategy continues to focus on seeking “solid companies with business models that can react and persevere in reaction to these pricing pressures and volatility by creating and maintaining competitive moats.” By focusing on high-quality businesses that he believes should outgrow their markets over the long term, the strategy can leverage market volatility and weather tough years like 2022.
Listen to the podcast above to learn more about the Mid Cap Core performance in Q3 2022 and join us in Q4 for another stock market performance review.
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.