Our Macro team held a flash call outlining the pivot in market signal to a Quad 1 positioning as we approach 1Q22. Quad 1 is where growth is accelerating and inflation is slowing. Consumer Discretionary equity remains one of the best assets classes to be invested in during Quad 1. Every name in our universe (at least with enough history) has a positive expected value in Quad1 when it comes to back checking average returns. The main changes we’d flag is to go up the cap spectrum to more mid/large cap vs small caps in Quad2 and shifting to higher quality vs junky value names. Beta, momentum and growth are still good factors to follow. Looking at subsectors that tend to outperform home/durables is one that jumps out. We remain bullish on consumer spending in the coming months driving accelerating real growth, but our Macro team’s view now includes inflation slowing.
Top ideas we’d flag on the long side as it relates purely to the US Quad 1 pivot factors are CPRI, RH, AMZN, and NKE. On the short side CURV, BGFV, and SNBR.
Our Best Idea Quad overview below on total return during a given Quad quarter. We excluded international companies and those with limited public history.
