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  1. Richard Bernstein Advisors Channel
  2. Dan Suzuki on Positioning for Q2 Earnings
Richard Bernstein Advisors Channel
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Dan Suzuki on Positioning for Q2 Earnings

Nick Peters-GoldenApr 13, 2023
2023-04-13

Earnings season proper is very close at hand. While every earnings season is important, this season arrives at the center of and the source of all sorts of narratives. Whether it’s the looming recession simmering in the background and perhaps showing up in earnings, or what earnings may mean for the Fed regime and fight against inflation, positioning for Q2 earnings will be important – and Richard Bernstein Advisors’s (RBA) Dan Suzuki has thoughts on how to do so.

Speaking on CNBC’s Fast Money program, Suzuki, RBA’s deputy CIO, explained how RBA sees the current market environment and where it is looking to leverage its approach. RBA invests according to the profits cycle, eyeing key factors including profits, sentiment, and liquidity, and aims to avoid trying to “time the turn” by relying on top-down, macro research.

See more: RBA’s Bernstein on 70s’ Inflation, Speculative Investing

Suzuki explained that a lot of investors, still unwilling to give up on the parts of their portfolios that have provided big capital gains from the big tech bubble over the last few years, should be watchful about the new regime this earnings season.

“People don’t want to go where the future leadership is going to be which is not where the bubble is, that bubble is still deflating,” Suzuki said. “I’d say the leadership over the last ten years was really driven by U.S. large-cap growth, U.S. mega-cap growth, however you want to define it, innovation, technology, all that stuff, it includes the mega caps to be sure."

Instead, answering a question from the panel about where to invest in this market shift, Suzuki emphasized going where capital is needed.

“If we’re right and there’s a bubble that’s still deflating, if you think about what a bubble is, it’s a giant vacuum for capital, so you get this massive misallocation of capital into one area of the market so where is the big opportunity where capital is scarce, it’s pretty much everything else,” Suzuki stated.

“If you take out those three sectors in the U.S. that are dominated by technology I think everything else is fair game, probably not defensives that won’t be the leadership of the next cycle, but everything else,” he added. “That’s international, that’s small cap, that’s value, that’s pro inflation assets, no one wants to own that stuff because it’s underperformed for a decade or two. That’s why it’s so cheap and that’s where the opportunity is.”

For Suzuki, this earnings season is likely to be tougher than the last earnings season with growth slowing, and those firms that are most sensitive to slowing growth are most likely to be hurt by that in their positioning for Q2 earnings.

Tech is a notable example, impacted by liquidity as well as on the earnings growth side. RBA considers liquidity as one of its three key factors and offers an ETF that packages its approach with an added ESG screen, the iMGP RBA Responsible Global Allocation ETF (IRBA ).

IRBA has seen an improvement in returns over the last month, with 3.3% return in that time compared to 0.6% over the last three months according to VettaFi. Charging 69 basis points, IRBA actively invests in other ETFs that it “x-rays” to find the best exposures that can benefit from either accelerating, or decelerating, profits.

For more news, information, and analysis, visit the Richard Bernstein Advisors Channel.


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