Insights
On this episode of KayneCast, Steve Rigali, Executive Managing Director with Kanye Anderson Rudnick, speaks with Jon Christensen, Portfolio Manager for the KAR Small Cap Core Strategy. Christensen provides insight into the impact of AI on equities and offers a positive 2023 stock market outlook.
Reduced Recession Risk Bolsters Small Cap Stocks
After four months of negative returns, Small Cap stocks rose in June, led by Energy, Consumer Discretionary, and Materials. While the yield curve remained inverted, the likelihood of a severe recession fell, calming the market and resulting in generally positive returns in Q2. The Russell 2000 Index skewed heavily towards lower quality during the quarter, with almost all metrics favoring low over high quality.
Navigating Uncertainty in Equity Markets
In his stock market outlook, Christensen notes the markets “seem to be absorbing the ups and downs of inflation” as the Fed remains focused on getting inflation back to two percent. While concerns about a mild recession in the U.S. economy have diminished, they remain valid. Christensen notes that “local as well as global financial entities could continue to see some volatility as they move through the year, and yes, this could cause further disruption in equities.” The Russia/Ukraine war continues to dominate geopolitics, and the fallout from March’s unexpected banking crisis continues to affect the market.
Factors such as these create uncertainty in terms of entry points for equity markets. Christensen, however, believes “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” can help portfolios weather periods of uncertainty.
For more insights, read our Q2 2023 Commentary, subscribe to Kaynecast where we provide the latest updates on our investment strategies, or listen to the podcast for Christensen’s complete stock market commentary.
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.
