Friday, July 1

Economies continue to grow and business results are strong, and this gives the stock markets a lot of strength

As 2021 draws to a close, what is your vision for the US stock market?

On the surface, and not only for the American stock market, but also for stock markets in general, 2021 is on the way to being a very good year in terms of profitability and very solid, something that is a bit to continue the path of last year. But this is on the surface. If we look a little below, it is being a quite volatile year in many areas of the market: in terms of management style, in terms of sectors, in terms of geographical areas. For example, the year started very strong in the first quarter in the part of value, then in the second quarter the part of growth became stronger, the rest of the year was more mixed and in November we saw a resurgence of growth. Regarding geographical areas, it is true that the American stock market is doing very well, but there are other areas such as emerging markets that are lagging behind. We also see this dispersion in many sectors or even in the indices themselves, for example in the case of the Nasdaq, profitability is determined by the profitability of certain companies within the index. If we go to the American stock market in particular, we see that the risks that investors were initially taking into account are still there, such as bottlenecks in supply chains, inflation, tapering, prices of raw materials, Covid … But nevertheless it seems that the investor is not giving them great importance because the underlying scenario is that economies continue to grow and business results continue to be strong, and that is what is giving a lot of strength to the stock market and to the returns.

In a year like this, what strategies do you use to navigate in this type of environment?

In a year like this in which the photo is good but there is a lot of volatility and a lot of movement, we are very focused on our background AB Select Us Equity, which is a fund that invests in the American stock market in a “core flexible” way, which means a fund that can move in different management styles (value, growth, etc.) in a very flexible way. , a crucial strategy for a year like this. What we do in this fund is to look for what are the drivers of the market in the long term but manage a lot the risks in the short term. On the other hand, we also think that we are witnessing a change in an important economic paradigm, we came from years of low growth and low inflation and we have gone on to higher economic growths and higher inflation as well, and this affects the different investment styles or market shares. In this sense, in our fund the part that we have invested in growth we do not have the part of hyper-growth companies because we see that valuations are very expensive for our estimates and, furthermore, with this change in paradigm, certain companies can be very sensitive to For this reason, in the growth part we prefer to be in the quality growth part. On the value side, we see that this paradigm shift has opened our eyes to the fact that this style of value can have a more consistent and long-term journey, and we have part of the portfolio invested in financial or even energy in companies of very good quality at very attractive prices and that we think can benefit from this paradigm shift. And in the most defensive part we have a part of the portfolio in the health sector that we see that at times, for example, of market risk, especially due to the Covid part, they help us keep the portfolio very stable. In the end, a fund with a “barbell strategy” in which we mix different management styles in a flexible, calm way and also looking at the long term.

And what are the results of the fund?

It is a fund that turned ten years ago a couple of months ago, that is, it already has an important history to look at. It is a background art. 8 SFDR that now both investors and managers, companies and the world in general are watching. In this topic, the ESG factors are integrated when selecting the companies in which we invest and we attach great importance to engagement, that is, to that very active conversation with the companies in which we invest to try to improve all ESG aspects. On the other hand, it is a fund in which, due to the way we manage, we do not pretend to be the first in the class each year, but rather what we are looking for are consistent returns in the long term and during the different periods, and we achieve that, We are always on the high side in this regard if you compare us with our fund category, and we also do it in a calmer way because we have less beta and less volatility than the market average. If we look at other types of metrics, such as sharpe ratio, alpha, etc., we are also in this high part of funds within our category. And finally, the bullish vs. bearish market capture ratio is very good and attractive and in the end that conveys very well what the fund is looking for and what we do: participate in bull markets but in a calm and controlling the risk a lot. It is a fund that this year is when we are receiving the most inflows so it is very suitable for a year like the one we are experiencing.

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