He explains: “As interest rates increase, valuations start to matter a whole lot more. Growth comes into focus, fears around recessions develop and stocks derate in price in line with the elevated risks in the macro environment”.Therefore, it was no surprise that counters that came under strain in 2022 were high-duration, high-growth stocks, or stocks that are pricing in elevated levels of growth for a very long period.
“We felt that the yields on these bonds were very low, even after the pandemic and essentially could only go up from there.” He adds: “We have seen some of that start to come through already, but margins are still a lot higher than we think they will be during a recessionary environment.”interest rates will peak next year and that it will result in interesting investment opportunities.