In this episode of KayneCast, Jordan Greenhouse, Managing Director with Kayne Anderson Rudnick, talks with Jon Christensen, Portfolio Manager and Senior Research Analyst for the KAR Small Cap Core, about the key drivers behind volatility in the Q3 in the Small Cap space.
Q3 Continues the 2022 Market’s Wild Ride for Small Cap Core
Christensen begins his Q3 stock market commentary by noting the entire year has been marked with sudden changes and uncertainty. The Russell 2000 index for 2022 has had five negative and four positive months, with “gyrations between positive and negative month-to-month.”
Inflationary pressures, war, supply chain delays, and recession fears all worried investors, with volatility accelerating “into Q3 as July saw a recovery from the brutal Q2 numbers with the Russell 2000 increasing over 10%. August took a breather and was lower by 2% as the summer doldrums hit, but September – which has a history of being weak – lived up to its billing by surging lower by almost 10%.”
Overall, the quarter was skewed towards lower-quality Small Cap investing, which is historically what happens during volatile economic times.
Q4 Small Cap Outlook Sees an Economy Poised for Weakness
Between supply chain uses, the ongoing Russia-Ukraine conflict, and inflationary pressures, the economy is expected to be weak in the fourth quarter. How severe and long-lasting this downturn will be remains to be seen, but Christensen believes KAR’s Small Cap portfolio is “well-positioned to ride out the turbulence.”
In Christensen’s view, KAR’s focus on companies with solid, strong revenue characteristics should help mitigate the impact of the weakened economy. Christensen advocates for continued patience and diligence in seeking Small Cap companies while monitoring existing holdings for changes in their structural investment stories. By doing so, he believes KAR can identify high-quality businesses that have the potential to “outgrow the markets over the long-term and take advantage of this market volatility.”
Listen to the podcast above to learn more about the Small Cap Core performance in Q3 2022, and join us in Q4 for another stock market performance review.
Contact Kayne Anderson Rudnick today to learn more about our Small Cap Core strategy.
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.