SGH Insights

Welcome to our SGH Insights – Medical Technology Fund

With Rory Hunter, Portfolio Manager, SGH Medical Technology Fund

We would like to introduce SGH Insights. This initiative is being introduced to give investors an understanding of how we seek to identify market anomalies and investment opportunities during uncertain times when macroeconomic factors are increasingly driving markets. This will help communicate how data interpretations impact our company research and portfolio positioning. The bulletin nature of the communication is designed to provide readers with such insights while requiring only a two-minute read?– a picture is worth a thousand words.

Sentiment?

We like to utilise simple observations, such as covers of widely read financial publications, to complement our sentiment indicator models. The below magazine cover from Barron’s?October edition comes as a contrarian indication that the incredible run of US Dollar strength could be losing steam.?

Key implications of a pullback in the USD:

• A broad equity market rally
• A?rally in precious metals – the strength of the USD has been a significant contributing factor to the lousy performance of gold in the sort of inflationary environment in which precious metals have long been expected to prosper in?

Figure 1:?Barrons’ October Issue front cover?

Source: Barron’s

Macro?

Inflationary pressures have been driving central bank monetary tightening initiatives, which in turn have been driving equity markets lower?-?the price of money dictates the price of assets. So, where do inflationary pressures currently reside? It has, and continues to be, a two-part story.

1. Goods inflation?during the pandemic – disinflationary pressures and now starting to emerge?
2. Services inflation?– as we continue to emerge from the pandemic, consumers are willing to pay up to make up for lost time

Figure 2: Manufacturing prices paid for goods continue to decline and move into negative territory – historically a strong correlation with CPI Inflation – now a disconnect

Source: SG Hiscock & Company, Bloomberg

Figure 3: US consumers are being stretched to their limits to continue spending on goods and services being offered at significantly inflated prices?–?unsustainable from our perspective

Source: SG Hiscock & Company, Bloomberg

SG Hiscock & Company has prepared this article for general information purposes only. It does not contain investment recommendations nor provide investment advice. Neither SG Hiscock & Company nor its related entities, directors or officers guarantees the performance of, or the repayment of capital or income invested in the Funds. Past performance is not necessarily indicative of future performance. Professional investment advice can help you determine your tolerance to risk as well as your need to attain a particular return on your investment. We strongly encourage you to obtain detailed professional advice and to read the relevant Product Disclosure Statement and Target Market Determination if appropriate in full before making an investment decision.?

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