Narratives
Rotating sectors is not nearly granular enough for todays narrative driven trading environment. With news and social media dominating modern life disseminating every detail and algorithmic trading software ready to read, interpret and act on it, it is not hyperbolic to say that narrative investing is the single most important development in the modern capital markets.
These narratives can impact specific stocks, industry sectors or even regions impacted by changes to government regulations. The post pandemic crash was a great example of a narrative driven market from Covid reopening to runaway inflation, to Putin‘s invasion of Ukraine and the Chinese governments attacks on its own tech industry. It impacted every capital market differently. Commodities continued to rise, bond markets were obliterated by inflation and even safe haven sectors like consumer staples and energy eventually fell victim to the indiscriminate selling of investors fearing the impact of these competing cross current narratives.
Our strategy makes no calls on any of the narratives impacting the capital markets. Although we make no calls either way, these narratives create short term noise which often obfuscates stocks which have been achieving above average long term performance. We look through this short term variability to build a portfolio of long term winners in an equal weighted basket, expecting this performance to continue for many years to come.
