Language | 
English
Spanish
Despite the relatively strong performance of the major stock market indices, fast growing companies had a challenging time in Q4 2021 as investors faced the prospect of tighter U.S. monetary policy and higher interest rates. Hyper growth companies are typically more sensitive to changes in longer-term interest rates with their projected earnings streams more heavily weighted towards future years.
Over Q4, the LOM Innovation and Opportunity Fund fell 4.57%. During the same time period, the widely followed ARK Innovation Fund fell 14.91%. Since inception, on March 19, 2021 the Fund has declined by 3.31% compared to -22.70% for the ARK Innovation Fund.
The global economy continues to reopen and US consumers are in solid shape, having experienced the highest net worth and lowest debt-service obligation on record. Historic monetary and fiscal stimulus boosted housing and financial asset prices, drove interest rates downward, and delivered direct fiscal transfers which helped generate record savings gains. Higher inflation remains a challenge, but pent-up demand appears to be offering steadying mid-cycle influence.
Corporate earnings surprised to the upside for the fourth quarter in a row. Sales growth accelerated amid faster nominal growth and greater corporate pricing power. Market expectations for 2021 earnings were revised upward to a robust 45% year-over-year growth rate, but expectations for 2022 ticked down. The ability to maintain high margins amid rising wage and input costs remains key to the corporate earnings outlook.
Top sectors in Q4 included Real Estate (+17.50%), Information Technology (+16.69%) and Materials (+15.20%) while Communications (-0.01%), Financial Services (+4.52%), and Energy (+7.89%) were the weakest. Overall, market gains for the major averages came on the back of strong corporate earnings which allayed fears of a profit slowdown.
The information contained in this article is for information purposes only, and represent the views of the author. It is not intended as specific investment or financial advice, or a recommendation or solicitation to buy or sell any security. Any investments or strategies listed in this article may not be suitable for all investors. Past performance is not indicative of future performance, and as with any investment, prices may fluctuate. It is recommended that advice is sought from a qualified investment professional prior to implementing any financial plan. LOM has made every effort to ensure that the contents herein have been compiled from sources believed reliable, however LOM does not warrant the accuracy, adequacy, timeliness, or completeness of this information expressly disclaims liability for errors or omissions in this information.
