Inflation Still Front of Mind

Inflation Still Front of Mind

Small Mid Cap Core Review of the Fourth Quarter of 2021 | KayneCast 173

January 20, 2022

The 2021 stock market, while not as volatile as 2020, remained unpredictable thanks to new strains of COVID-19 and pandemic-related disruptions to the global supply chain. Despite these challenges, a focus on fundamentals re-emerged in the third and fourth quarters of the year.

While names with low volatility and weaker balance sheets led the Russell 2500 benchmark’s performance for Q4, index performance for the year was driven by names with low balance sheet quality and higher volatility. Names with higher ROE outperformed in stock market performance reviews, but those returns were achieved with higher financial leverage.

Julie Kutasov, Portfolio Manager of the KAR Small-Mid Cap Core Strategy, notes the “most important driver of the renewed focus on fundamentals was certainly a change in the interest rate outlook,” due to pressures on input costs caused by post-pandemic supply chain disruptions, labor shortages and, in the second half of the year, the spread of new COVID-19 variants.

Key Contributors and Detractors in Small-Mid Cap Core Strategy

Listen to the podcast above to learn more about the top contributors and detractors in KAR’s Small-Mid Cap Core strategy for Q4 2021.

Moving Forward in 2022

The 2022 stock market outlook depends, in large part, on COVID-19, with the potential for new variants to emerge, and on the change in interest rates in response to inflation expectations.
For Kutasov’s full Small-Mid Cap Core stock market commentary, listen to the podcast above.


Learn more about our small 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.