Investment Committee – April 2022
Absence of escalation on the Russia/Ukraine front, and Easter holidays in the Western world, makes for an uneventful April. Expect stock exchanges making lower highs as market absorbs the significance of upcoming interest rate hikes.
Possibly, an uneventful April
The Committee noted the upcoming Easter holidays that usually work as a volatility absorber from the markets and it discussed how bonds may be appealing as a tactical trade after their March sell-off. We are adamant that central banks will provide some cushion in the event of any extreme negative price action in the exchanges, and hence any dip to the extent of, say, 20% should be bought.
On US Dollar we remain positive and suggest any spike of the EUR/USD exchange rate above 1.1200 should prove a dollar buying opportunity.
We are skeptical of Gold in this environment primarily due to higher rates, possibly less persistent inflation, and the development of the Russian/Ukrainian conflict.
For the remainder of this newsletter, we present some information on our research capabilities for our frequent readers.
Qualimetrics in KM Cube
Research is always a big work for us, continuously evaluating new signals and strategies in our effort to enhance our risk management capabilities and portfolio construction methodology. We ask questions such as: ‘How can we respond better to sudden changes in a risk environment like this of the past couple of years?’
Our source of inspiration is diverse, backed by our own experience, the recent academic literature, or our peers. We do not necessarily always come up with new proprietary ideas, but managing money successfully is not always about novelty but rather consistency.
One such approach is our selection methodologies for equities. In our website’s interactive tools we offer a suite of systematic selection methods, open to our clients, for a variety of styles such as value, dividend, disruptors, and more. We employ both fundamental as well as quantitative criteria and we are not shy to share the methodology with our clients.
The product of this work comprises the core of our portfolio selection process, but – perhaps even more importantly – also works as the universe of shares we access to issue customized structured products. This kind of thinking can prove important as we are entering an uncharted market environment with few similar historical precedents. We have already seen what a shock like the Russian invasion of Ukraine can deliver to market prices.