Nudgem Richyal says it’s time to look at the worst-hit sectors of the market as the inflation of the past year is overwhelmed by a bigger deflationary force.
has been kinder to Richyal and Lees – the portfolio returned 4.9 per cent for July – and when this column connects with Richyal at his Singapore base, he’s hoping a better-than-expected inflation print might keep the rally running.“You can certainly make the case that maybe the fear of the Fed having to break things and go too far will wash out somewhat, and you get a little bit of a yellow light – not a green flag – to carry on going in that [upwards] direction,” Richyal says.
That would be good for Richyal’s portfolio, which is dominated by long-duration stocks, which were beaten up in the first half of this year but are now rising off their lows. He says it’s time for investors to start looking at higher-quality stocks in parts of the market that have been heavily sold during the past six to nine months, such as technology.“Some parts of the market really have already suffered.
“This is the correct time to sharpen your pencil and find an IPO that’s actually a good quality company but the baby has been thrown out with the bathwater,” he says. “Because there’ll be some pretty solid businesses over the next five, 10, 15 years who may just have derated because they happened to IPO at exactly the wrong time, or they happened to de-SPAC at exactly the wrong time.
And as this column has been banging on about for months, the excesses of the past decade, let alone of the past few years, look a long way from being washed out of this market.P is now up 16.7 per cent since its low in mid-June, the Nasdaq Composite is up 22.6 per cent and the ASX 200 is up 9.3 per cent – they need to be at least considering the idea that the market has bottomed and risk-on sentiment can keep running for a while.
Many economists argue that ageing populations will be inflationary: the trend of fewer workers pushes wages higher, and consumption of healthcare and similar services explodes. But Richyal has a somewhat contrarian view. Richyal does see risks to his argument, particularly around the appetite for borrowing in the economy; if this is considerable, persistent inflation is possible.
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