TOL - 20th Dec, 2023
Matthew Kidman's top ideas for a small-cap recovery in 2024
In this Views from the Top interview, Matthew shares why he believes rates will be lower in a year's time.
While the macro is important, it's the rate cycle that investors should have their eyes glued to over the next few months.
That's according to Centennial Asset Management's Matthew Kidman, who argues that while the global economy is slowing down, the yield on the US 10-Year Bond has recently cooled off.
This is good news for equities, Kidman says, particularly with inflation trending downwards.
"What we haven't seen yet is six to 12 months down the track, the benefits of lower interest rates in the real economy. That's yet to come and that's why we're bullish going out into the next year," he says.
If rates have peaked, which Kidman believes they have in the US, investors should follow the interest rate cycle and position their portfolios to leverage into a better economy in 12 month's time.
He argues that this bodes well for small caps over the year ahead, arguing the Federal Reserve should be cutting cash rates by the mid-year (and Australia will follow suit a few months later).
"I'm talking about a cyclical upturn. So I'm a believer that at the moment we're going through the trough - rates are peaking and will come down. So in that market, you've got to figure out what works better when rates are lower this time next year," he says.
Kidman believes building materials, property developers, and some retailers could benefit, as well as non-bank lenders, and tech businesses that benefit from a stronger economy.
"2025 is probably when we see it in the numbers a lot - like earnings ticking up quite measurably. But in 2024 the market will go," he says.
In this Views from the Top interview, Kidman dives deeper into why he is bullish on the outlook for small caps, the sectors and stocks that could bounce from here, as well as why he believes investors should be long right now.
Note: This interview was recorded on Friday 8 December 2023.
Timecodes
- 0:00 - Intro
- 0:39 - Why Matthew is bullish on the outlook for equities
- 2:19 - Why rates are key to the equity market's performance
- 3:13 - Bond yields have fallen - what does this mean for markets?
- 4:05 - Recession risks
- 5:23 - Large cap versus small-cap exposures in the Level 18 portfolio
- 7:38 - Signs that investors are becoming more bullish on small caps
- 9:07 - Sectors and stocks that could bounce in 2024
- 14:08 - Wishlist stocks versus stocks investors should be buying now
- 15:42 - Shorting opportunities for small-cap investors (and a stock the team is shorting)
- 17:51 - Matthew Kidman's view from the top
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Ally Selby is the deputy managing editor at Livewire Markets, joining the team at the end of 2020. She loves all things investing, financial literacy and content creation, having previously worked for the likes of Financial Standard, Pedestrian Group, Your Money, Sky Business and Sky News.
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Ally Selby,
Livewire Markets
Ally Selby is the deputy managing editor at Livewire Markets, joining the team at the end of 2020. She loves all things investing, financial literacy and content creation, having previously worked for the likes of Financial Standard, Pedestrian Group, Your Money, Sky Business and Sky News.
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Ally Selby is the deputy managing editor at Livewire Markets, joining the team at the end of 2020. She loves all things investing, financial literacy and content creation, having previously worked for the likes of Financial Standard, Pedestrian...
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