| John Mayer, Chief Investment Officer of GlobalX |
Inflation in the US has not disappeared, but it is cooling. , published last week, indicated an annual level of 6.5% and a monthly decrease of 0.1% in December, similar to the early market forecasts.
Looking more broadly, the current round of inflation has dropped from a peak of 9.1% to the current level of 6.5%, but it is still a very high level that is burdening US households. The index, which does not include the volatile energy and food items, increased on an annual basis by 5.7% and on a monthly basis also registered an increase of 0.3%. This is a decrease compared to the record of 6.6% recorded in September.
However, it is evident that the market expected a downward surprise, like last month. Now our assessment at GlobalX is that the Federal Reserve will raise February by a quarter of a percent, but it won’t be the last hike. Inflation is indeed decreasing, but there is still a long way to go.
In the high-tech sector, the waves of layoffs continue. The streamlining moves help technology companies adapt their workforce and their expenses to the new economic conditions. Quality technology companies, with strong cash flow, large market share and high profit margins can outperform general growth.
On the other hand, an increase in may cool private consumption and slow down growth. High-quality, defensive stocks may show higher performance during the economy’s slide into recession.
Also, there are opportunities also among (small cap), which tend to set a bottom during the recession and show accelerated growth during recovery, and therefore we have a certain preference in favor of such stocks.
The author is a senior investment manager at the GlobalX hedge fund company. The above should not be considered as investment advice, recommendation or opinion regarding any financial products.