Inflation hits.

 22 Jan 2022

Dear Fellow Investor,

Growth versus value

 

This chart is from the Fleet St Letter, a stock advisory I subscribe to. It shows a shift from growth shares to value shares. As inflation increases and bond yields advance, money flows into sectors such as old economy businesses which have established revenue streams. These could be consumer related such as healthcare, oil and gas, and commodity businesses including plantations.  Gold and precious metals have been well supported as they are inflation hedges.

Berkshire/B, Warren Buffet’s fund traded on the NYSE is a holding for some of our PGWA accounts and is a component of the Fleet St Letter portfolio . 

It is a classic value fund and holds quality old line companies. Notice during the on going correction, Berkshire is holding above major support and its 200 day moving average and continues to advance. Many high flying  technology/ growth shares have lost upwards of 50 % in the on going correction. More than 50 % of Nasdaq shares are currently trading below their 200 day moving average.

The technology shares in the US that have been stable are those with solid revenue streams such as Microsoft, Apple and Google. The same is true in Malaysia, Hong Kong and Singapore.

The worldwide trend is for higher interest rates and more inflation so our focus should be on value shares. This should protect us from the current environment.  I do not think there will be dramatic interest rate rises as this would push the world into recession. Rises will be gradual and behind the curve.  Once we have the first rise expect markets to rally as the uncertainty is removed. Our Singapore shares which are heavily weighted towards value have been performing well especially the banks.   

Take care
Bill

The inflation monster