Mackenzie Minute: March 31, 2017
Jonathan Norwood, Portfolio Manager on the Mackenzie Cundill Team, discusses recent market events and the impact they may have on value stocks.
JONATHAN NORWOOD: What we’ve seen is the value style take a bit of a breather in terms of its outperformance relative to growth and low vol. We think that that’s primarily been driven by the sell-off in commodity prices. We think that the inability for the Republican administration to get through its health care reform – and quite frankly we think that we’ve seen some profit-taking in the value space and we believe that there are some jitters in the market today with respect to some key events that are coming up over the pond later this year.
We’re certainly keeping an eye on Brexit and we’re also keeping our eye on the elections that are taking place in Europe. We’re keeping our eye on the economic data in the US, inflation and the Fed’s view; but we’re acutely watching the Republican administration’s ability to build consensus in Congress, and to get through their tax agenda, their deregulation agenda and certainly their stimulus agenda, which we believe could have significant implications for the types of stocks that we own.
The backdrop is very constructive for stock pickers. When I say that I mean the reward from actually doing fundamental bottom up analysis on a stock is paying off and stocks are reacting more to their own fundamentals than they are to sort of any underlying trend with respect to monetary policy or quantitative easing. Certainly low interest rates have floated all boats and they’ve lifted all asset classes and mostly fixed yield asset classes. We believe that going forward, stock pickers will in fact be rewarded for the work that they do on individual names and we believe that yield oriented securities are certainly not going to do as well.