EQUITIES CHAPTER
“ANTILOOP’S EQUITY TEAM CURRENTLY HAS A POSITIVE VIEW ON DEFENSIVES – TOBACCO, RETAIL BANKS, LOW-COST RETAIL – VERSUS TECHNOLOGY AND CYCLICALS; AS WELL AS PREFERRING CHINESE GROWTH STOCKS, LIKE ALIBABA, TO US COUNTERPARTIES, LIKE AMAZON.”
KARL-MIKAEL SYDING PORTFOLIO MANAGER, ANTILOOP HEDGE
T
he decades-long growth/ value divide looks like it could narrow during 2022, or could passive index flows really continue to make the gap even more absurd? Both a continuation and a reversal alike have the potential to wreak havoc with equity hedge fund returns. Antiloop’s equity team currently has a positive view on defensives – tobacco, retail banks, low-cost retail – versus technology and cyclicals; as well as preferring Chinese growth stocks, like Alibaba, to US counterparties, like Amazon. The Fed’s Powell already seems to be backpedalling from his hawkish stance – although admittedly questioned to begin with. Were he to decisively reverse course and halt QE tapering or postpone
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rate hikes, the hoped-for growth/ value correction would probably be put down before it even got going. Such a move could wrong-foot Antiloop’s growth-sceptical equity strategy, and probably many other equity hedge funds as well. Central banks will eventually get price inflation gauges under control, through careful tightening. Rate hikes combined with lingering supply shock induced inflation could fuel investor rotation into, e.g., retail banks, from high-multiple growth stocks with questionable paths to profitability such as Robinhood, Peloton, Uber, DoorDash and AMC. The price for such tightening would be lower growth, further exacerbated by Omicron shutdowns – even if the latter (informed by
the Swedish laissez-faire example) turn out to be more limited than the initial pandemic related shutdowns. Only 0.5 per cent of US vehicles are fully electrical. Many manufacturers are only now bringing BEVs to market, thus setting the stage for explosive growth. One consequence is increased demand for materials, like graphite, nickel, cobalt and lithium, as well as copper for electrical wiring. The focus on sustainability should further increase interest in uranium, and REEs used in motors and turbines. Renault, GM and Honda should benefit too.
HEDGE WEEK GLOBAL OUTLOOK REPORT I JANUARY 2022
