January 2022

Executive Summary

  • The Omicron Coronavirus variant was the biggest theme in markets in December and led to a significant sell-off in early January.

  • In our view this latest COVID wave will result in a pick-up of vaccination rates and can accelerate the end game for the pandemic – as more exposure, more vaccines, and effective treatment will move us towards endemicity faster.

  • The bond market responded to the hawkish Fed minutes that added fire to the equity sell-off. Interest rates rose sharply with the 10-year Treasury yield going from 1.40% to 1.76%... above the 2021 peak. The next level is 2.0%.

  • Fed funds futures now price in an 86% chance of a March 2022 rate hike.

  • Technology stocks have been the main victims of higher interest rates expectations. In 2021, 40% of Nasdaq member companies fell by more than 50% from their 52- week highs. Technology growth stocks do not perform well when interest rates rise.

  • We offer investors a contrarian view on technology stocks. While we think in 2022 – 2023 technology stocks will continue to underperform, this will be the best time to accumulate strategic positions (on the way down) in these companies, which will be the leaders in the current business cycle and will outperform the major equity indexes on a 5-10-year time horizon.

  • The Technology of the Future Fund had a -4.71% return in December, underperforming the benchmark MSCI World Index (USD), which had a return of +4.19%.