According to the Bureau of Economic research, the recession ended in May 2020. This is important because based on historical data this would put us in the mid-range of the economic cycle.

Typically in the first phase of the cycle we see the economy accelerating aggressively up. The companies that tend to do best in the first phase of the cycle are the same companies that were hit the worst during the recession. Usually these are the lowest quality companies with the worst balance sheets such as those in the oil and gas, airline and cruise line businesses.

In the mid-range of the cycle (we think we are currently in), companies that have the ability to grow their earnings with inflation tend to do the best. The market becomes much more selective and sector/stock selection become much more important. Information technology and industrials tend to do well. As do companies with clean balance sheets and competitive advantages.

Our current asset allocation reflects this thesis.

If you have any questions please feel free to give us a call anytime.

Have a great weekend.

Milan