Is the US market expensive?

February 2023

The Fund was flat (up 0.1%) in February 2023.

Investors wrestle with uncertainty in the global markets at present: what does Quantitative Tightening mean and will central bankers and politicians hold their nerve in the face of continuing adversity? Will inflation go up, down or sideways, in which order and for how long (interest rates likewise)? Will there be economic hard, soft or no landings? What is the impact of the ongoing war in Ukraine, the trade tensions with China (it remains the world’s largest exporter of goods, by the way), the energy transition alongside climate change? And so on.

Facing these unknowable quandaries, investors should be wary of paying up, especially for a rosy consensus. For instance, the US, on average, is expensive and priced to deliver sub-par returns – well laid out recently in this Hussman Funds article. It’s not that the US can’t perform, but it is fighting an uphill battle.

Rather, Kennox has the portfolio strongly tilted towards the inexpensive and unloved, trading at a significant discount to US and global markets. This simple but powerful advantage over the market significantly improve investors’ chances of producing positive returns even in tough markets. In times of headwinds and uncertainty, this can be invaluable.