The stock market is transitioning from a focus on big growth stocks to smaller firms in sectors like health care and consumer goods, Ned Bell, chief investment officer at Bell Asset Management, said at a recent event.
According to Mr Bell, a change is occurring with small companies tipped to outperform as inflation spikes and interest rates rise globally in 2022.
“We’ve seen a lot of valuation risk materialise at the top end of the market, however, we’re seeing good valuations in the global small to mid-cap (SMID) area,” said Mr Bell.
“The earnings recovery still has a long way to play out in the SMID arena, with SMID EPS growth in 2022 estimated to be 21 per cent compared to 12 per cent for the MSCI World index.”
He believes global small and mid-cap equities could potentially appreciate by around 33 per cent over the next 12 months.
“With inflation spiking and interest rates rising, that’s a double whammy for companies that don’t have pricing power,” Mr Bell said.
Looking out to the second half of 2022, Mr Bell said that while inflation “will come off”, it’s not going to disappear.
“We believe ‘quality’ will shine in an environment where inflation is rising, interest rates tick higher, stimulus dissipates, and global economic growth decelerates.”
Maja Garaca Djurdjevic
Maja's career in journalism spans well over a decade across finance, business and politics. Now an experienced editor and reporter across all elements of the financial services sector, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies.
