In our latest note, we outline reasons for caution in certain parts of the equity market, look at possible geopolitical scenarios and give an update on portfolio strategy.
— We believe investors should be prepared for the risk of a US-led bear market, given valuations and allocations that we show are similar to 1929
— Rising global bond yields and weak fiscal positions may start to put pressure on broad equity market valuations; value stocks ought to be less impacted
— Semiconductor valuations appear especially extended
— Geopolitical risks remain significant, but we view the outlook as mixed: we see cause for some optimism in Ukraine and Europe but for some pessimism in Taiwan and in semiconductor valuations
— Against this backdrop, our strategy remains focused on companies with strong balance sheets, high free cash flow and the ability to return cash through dividends and buybacks
Read the article: Lightman Investment Management: Equity Markets & Signals