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Fast growing companies continued to experience a challenging time in Q1 2022 as
investors faced the prospect of tighter U.S. monetary policies and higher interest rates.
Hyper growth companies are typically more sensitive to changes in longer-term interest
rates as their projected earnings streams are more heavily weighted towards future
years.
Over Q1, the LOM Innovation and Opportunity Fund fell -12.66%. During the same time
period, the widely followed ARK Innovation Fund fell -28.60%. Since inception, on
March 19, 2021 the Fund has declined by -15.55% compared to -44.80% for the ARK
Fund.
Economic growth remained strong over Q1 2022 as the world continued to reopen
while still benefiting from last year’s massive fiscal and monetary stimulus. US GDP
grew 6.4% on an annualized basis, narrowly missing expectations of 6.7%, but the
trade deficit widened. On the employment front, America continued to add jobs while
wages rose. The U.S. unemployment rate fell to 3.6% in March, close to its low of 3.5%
reached in early 2020, just prior to the onset of the pandemic.
The narrative that inflation was transitory began to change at the end of last year.
During the first quarter, central banks gradually turned more hawkish. Adding to the
inflation concern, Russia invaded Ukraine in late February, prompting a raft of
sanctions against the oil-rich country. The start of the war between Russia and Ukraine
and the resulting commodity supply shock now poses a dilemma for central banks who
are forced to choose between trying to tame inflation while supporting growth.
Among sectors in Q1, Energy (38.99%), Utilities (4.77%) and Consumer Staples (-
1.01%) were the strongest performers. Communication Services (-11.92%), Consumer
Discretionary (-9.03%) and Information Technology (-8.36%) were the worst-performing
sectors. Notably, the energy sector benefited from a record surge in oil and gas prices.
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.
