Although we expect equities to deliver positive returns over the remainder of the current economic cycle, there are several risks to monitor over the near term: the ongoing pandemic, the situation in Ukraine, the spike in commodity prices, the bottlenecks in the global supply chain, and the concerns over higher inflation and higher interest rates. These risks will lead to volatility, but we don’t believe that these risks will lead to a recession.
We continue to believe that we are transitioning from early cycle to mid-cycle and that there are several years remaining in the current economic cycle. We favour the rest of the world over the U.S., value over growth, small and mid-caps over large caps, and cyclicals over defensives. U.S. valuations remain elevated relative to the rest of the world. Growth stocks will be under pressure as central banks begin raising interest rates. Small and mid-caps offer significant value over large caps. Cyclicals should continue to perform until global growth contracts. With that said, we believe the Fund is positioned appropriately, as long as the situation in Ukraine stabilizes.