Analyses
Equity Market Commentary - February 2022
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Takeaways & Key Expectations
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février 14, 2022
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Equity Market Commentary - February 2022 |
The US Equity Market:
AEA Style Positioning:
However, the more established mega-cap technology stocks never traded to the same frenzied level. That is how the environment today is different than it was in the year 2000.
Recent underperformance despite numerous impressive earnings reports means many of these large-cap growth names are now trading at very reasonable valuations. We would NOT recommend selling growth here.
3. The one group that continues to appear expensive to us are the defensive stocks.7 Bull markets don’t tend to end with investors willing to pay such premiums for relative safety.
AEA Geographic Positioning:
1. We regularly hear the calls from strategists that this will finally be the year to favor Europe over the US. It is true that Europe is cheaper and has more of a value bias. However, it’s one thing to make broad general calls like this and yet another to actually pull the trigger and reallocate assets out of the US to Europe.
Simply put, as an investor would you be comfortable selling Berkshire Hathaway, the largest US financial, to buy HSBC, the largest European financial? Would you sell Adobe to buy SAP or Amazon to buy Siemens?8 We certainly find some European stocks attractive, but I question jettisoning superior-performing companies for lesser ones, just because “they are cheaper”.9
2. The region of the world that has seen companies compound at rates competitive with great US companies is Asia ex-Japan.10 While that region woefully lagged in 2021, causing a drag on our performance for our global strategies, we continue to believe this is a better allocation for non-US assets than in Europe (or Japan for that matter).
Simply put, we believe finding great companies that are temporarily out of favor a far more enduring strategy than investing in laggard companies, hopeful that better results are to come.
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Head of Applied Equity Advisors Team
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