JACK: JACK PALM BEACH ARDOOTER
DOWN FOR A LOOK AT THE
INVESTMENT MANAGERS PLAYBOOK
FOR THE NEW YEAR.
>> THANKS FOR JOINING US.
YOU HAVE GIVEN "BARRON’S
ROUNDTABLE" AN EXCLUSIVE LOOK
AT THE PLAYBOOK FOR INVESTORS.
ONE THING THAT CAUGHT MY EYE IS
INFLATION IS ON EVERYONE’S
MIND.
YOU ARE ON BOARD WITH THE WALL
STREET CONSENSUS, PEAK
INFLATION BUT NOT SO OPTIMISTIC
WE WILL GET BACK WHERE WE WANT
INFLATION TO BE.
>> THE LANDSCAPE IS SHIFTING
FROM INFLATION RISK TO
INFLATION RISK WITH THE
MONETARY POLICY WE HAVE SEEN.
THEY HAVE BEEN OPTIMISTIC
RECENTLY BECAUSE INFLATION HAS
PEAKED TOWARDS A REOPENING BUT
WE HAVE TO FACE THE MUSIC IN
2,023 AROUND 3 KEY ISSUES, WHAT
IS INFLATION AND AT WHAT SLOPE
DOES IT DECLINE, SECOND IS
RECESSION AND THIRD IS
CONTINUED MONETARY POLICY
ISSUES AND WHAT IT MEANS FOR
HIGHER OR LONGER RATES AND HOW
LONG WILL IT LAST?
JACK: HOW DEEP WILL RECESSION
BE?
WHAT IS YOUR BEST GUESS AND HOW
LONG WILL IT SLOW THE ECONOMIC
PERIOD?
>> BECAUSE OF EXTREME
TIGHTENING WE HAVE SEEN WE GET
A FORM OF MILD RECESSION,
FACTORS TO DETERMINE HOW DEEP
IT WILL BE?
MANUFACTURING DATA MOVE TO
CONTRACTION TERRITORY.
THE CONSUMER REMAIN STRONG BUT
DIPPING INTO THEIR SAVINGS
RATES TO CONTINUE TO SPEND AND
EMPLOYMENT AND WAGE INFLATION
IMPORTANT IN DETERMINING WHAT
THE FED WILL DO.
EMPLOYMENT REMARKET TO REMAIN
STRONG BUT IF THEY DON’T IN
2023 THAT IS ASSIGNED WE WILL
HIT RECESSION.
JACK: WE HAVE SEEN A LOT OF
ANECDOTAL REPORTS OF LAYOFFS.
FEELS LIKE WE ARE BEGINNING
THAT PROCESS THAT IS PAINFUL
BUT THE FED WANTS TO GET US
THERE.
WHAT SHOULD INVESTORS BE DOING?
WHAT STOCKS CAN PERFORM WELL?
>> YOU WANT TO LOOK AT
COMPANIES AND STRATEGIES
RESILIENT TO RECESSION WHERE
YOU CAN GENERATE THE HIGHEST
RETURNS CAN WE ARE CONCERNED
ABOUT EQUITIES AT THESE LEVELS
SO AREAS LIKE INFRASTRUCTURE
COMPANIES WHICH TEND TO BE MORE
RECESSION RESILIENT BECAUSE
THEY ARE IN WASTE MANAGEMENT
SECTORS AND UTILITY SECTORS.
THESE ARE COMPANIES WITH STRONG
BALANCE SHEETS AND CONSISTENTLY
INCREASE DIVIDENDS GIVES YOU
SOME VOLATILITY PROTECTION AS
WE CONTINUE TO GO THROUGH THIS
TURMOIL.
JACK: YOU KEEP PUTTING OUT THE
GARBAGE, ONE STOCK PICK THAT
CAUGHT MY EYE WAS ZIMMER
BIOMED.
AFTER THE PANDEMIC PEOPLE CUT
OUT ELECTIVE SURGERIES BECAUSE
THEY WILL FALL, ARE PEOPLE
GOING BACK TO GET HIPS AND
SHOULDERS REPLACED?
>> HEALTHCARE IS AN AREA THAT
CONTINUES TO GROW EVEN IN A
WEAKER ECONOMY, PEOPLE WILL GO
BACK TO DO MORE PROCEDURES NOW
THAT COVID IS BEHIND US,
THERE’S A SECULAR TREND OF
AGING DEMOGRAPHICS, AND THEY
SHOULD HAVE REVENUE GROWTH AND
CONTINUE TO MAINTAIN MARGINS
GOING FORWARD. THEY ARE AT PEAK LEVELS FOR
THEY ARE AT PEAK LEVELS FOR
COMPANIES.
MARGINS COULD HAVE DOWNSIDE,
WITH HIGHER PRICING OR VOLUMES.
JACK: IT IS A HIGH-VOLUME.
ONE MORE PICK, NOT VERY
WELL-KNOWN, GERMAN INDUSTRIAL.
>> INDUSTRIAL GAS COMPANIES
CONTINUE TO GROW WHEN THE
ECONOMY IS WEAK, THEY HAVE A
NICE DIVIDEND YIELD OVER ONE%
AND CLEAN ENERGY STORY AS THEY
MOVE TOWARDS CLEANER
TECHNOLOGIES.
THE COMPANY TENDS TO RAISE ON
THE QUARTER WHICH THEY JUST DID
AND GET CONSERVATIVE GUIDANCE
SO IT IS WELL-POSITIONED
INDUSTRIAL GLASS COMPANY THAT
IS RESILIENT IN A SLOWER
ECONOMY.
JACK: LET’S HIT BONDS, THEY
WERE SUPPOSED TO BE THE SAFE
THINGS, THAT DIDN’T HAPPEN.
THE HIKE IN YIELDS WAS PAINFUL
IN THE SHORT TERM AND IN THE
LONG TERM, GETTING LONG-TERM BONDS.
THE ECONOMY SLOWS.
>> THE BOND PORTFOLIO INVESTORS
RELY ON HAVE NOT BUILT WELL,
THEY HAVE SIGNIFICANT DECLINES.
A LOT OF THE PAIN IS PRICED
INTO FIXED INCOME BECAUSE THE
PEAK OF INTEREST RATE INCREASES
ARE BEHIND US.
MORE MODERATE RAISED INCREASES
GOING FORWARD, IT WILL BE LESS
IMPACTFUL, WE LIKE HIGH QUALITY
BONDS OF THE TOTAL RETURNS ARE
ALMOST EQUITY LEVELS GOING
FORWARD.
INVESTMENT BONDS AND MUNICIPAL
BONDS ARE INTERESTING BECAUSE
THE FUNDAMENTALS OF
MUNICIPALITIES ARE STRONG AND
THE RETURNS LOOK HIGHER THAN
THEY HAVE BEEN IN DECADES.
>> WE ARE HEARING FROM
ADVISERS, THEY ARE HAPPY
CLIENTS CAN GET REAL RETURNS.