There is heightened uncertainty surrounding the outlook for 2023. In our report, “2023 economic outlook,” we place current events into historical context in order to illuminate the economic pathway. From the report:
We are at a critical juncture for the US economy. The current cycle shares many similarities with the 2000 bubble pop and labor participation reversal in addition to similarities with the 1970’s inflationary episode.
As we traverse the global phase change, increasing cross currents throughout the economy are the defining feature. Portfolio strategies that are well suited for such environments were explored in “Magellan and navigating uncharted markets”:
“The system is ideally suited for uncertain times, an actionable framework for managing stocks through time and space.”
Asset Opportunities in Small-Cap Value
The similarities today with the 2000 bubble pop and the 1970’s inflationary episode are many, as are the differences. Small-cap value performed exceptionally well following the dotcom bust. There were two contributing factors to the outperformance.
First, small-cap value offered initial starting conditions that were the opposite of the bubble valuations prevalent across the market-cap-weighted indices. They traded at deeply discounted valuations. Secondly, the economic cycle was shifting to a classic cyclical upturn rather than a resumption of the valuation-driven secular growth outperformance. This was amplified by the long period of underperformance for small-cap value which preceded the 2000 valuation top.
These conditions are in effect today.
CNX Resources
With conditions favoring small-cap value, asset opportunities within the group are especially attractive.
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