From the desk of Willie Delwiche.
- Despite macro concerns, evidence tilts toward opportunity
- Energy sector strength benefitting active asset allocators
- Country-level leadership favors dirty energy over clean plays.
A recently published article in the Wall Street Journal reviews “5 reasons why stocks might be weaker in 2022.” Mostly it’s a list of macro concerns, from liquidity constraints to slowing profit growth to elevated valuations. I am sympathetic to a number of them – to a greater or lesser extent they factor into my consideration of the weight evidence. We need to balance our thinking about various things that could happen against an assessment of what is happening. As any sailor might attest, there can be a big difference between risks on the horizon and conditions that need to be navigated. You don’t make much progress if you drop the sail the moment there are storm clouds in the distance. There may be a time to reckon with some (or all) of those clouds at some point, but as we have been discussing in recent weeks, the evidence right is tilting toward opportunity. Market trends and momentum have turned bullish and expanding rally participation points to improving (not deteriorating) breadth.