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Letter from a Portfolio Manager to his investors: A historic recovery with some difficulties (Part Two)


Without a doubt, one of the great protagonists in the financial markets for years, especially since the pandemic began. 

The good news came in December with the announcement of the Fed's action plan for the coming years:

  • Acceleration of tapering, so it will end in March instead of June 2022.
  • Interest rate increases, projecting three increases of 0.25% in 2022, another three in 2023 and two in 2024.

Although these measures may seem a priori negative for the stock markets, were celebrated by investors since uncertainty turned into clarity, something they demanded.

In addition, it will help relax inflation over time, eliminating excess liquidity that the markets no longer need.

The most positive thing is that probably, as the action plan for the coming years is defined, The Fed may stop being the center of attention of all investors, these being able to focus more exclusively on the analysis and selection of companies.

In this context, the selection of companies in which to invest (stock-picking) becomes more relevant if possible, because investors are no longer “buying everything” as has happened before, but are being more selective and therefore, each stock is adjusting to “its reality.”


The insatiable demand with the reopening of economies after the partial or total closure of factories has triggered significant bottlenecks in supply chains. 

During 2022 we will see how, as activity in factories and employment growth accelerate, unsatisfied demand will be covered. Matter of time.

It is also worth mentioning the role that technology is playing, allowing the adoption of automation and robotization by “forced” companies after the problems in hiring personnel in the labor market.


According to the Fed's latest forecasts, GDP growth in Q4 2021 will accelerate to a staggering 7.2%, putting GDP growth in 2021 between 5% and 6%. the oldest in 37 years. 

The unemployment rate fell to an incredible 4.2%, below what was recorded at the beginning of the pandemic (4.4%), and applications for unemployment benefits were the lowest in 52 years. 

Without a doubt, these are some spectacular figures that reflect a historic recovery.


We have seen during the year how quarter after quarter, a large part of American companies have published impressive results, beating all expectations of analysts

It is worth highlighting the better than expected results published by the large retailers such as Walmart or Target, which reflect that consumption, the main engine of an economy, is very active.

According to FactSet, the estimated average earnings growth for S&P companies in 4Q21 is 20.9%, the fourth consecutive quarter being higher than 20%.


The banking, energy and telecommunications sectors, which in 2005 weighed 40% of the European Equity indices, today weigh around 15%. On the contrary, the technology, health and care sectors have gone from 20% to more than 40%. 

This evolution reflects the structural changes that have occurred and will continue, in which everything that has been able to be absorbed by the software, it has been: Spotify (music), Facebook (social networks), SAP (accounting), etc.

In recent years, the transformation of the world is accelerating at a pace unimaginable until now. And this trend will continue in the coming years, which is why we find ourselves in a historic moment to continue investing in companies that are leading these profound changes and growing exponentially thanks to technology.

  • Artificial intelligence (AI): plays a key role in the transformation of all sectors. We are at an inflection point in which all those companies that are not developing or plan to do so in this area will find themselves at a clear strategic disadvantage compared to those that are.
  • 5G: the installation of the necessary network and infrastructure continues, with estimates that the 5G market will reach $188 billions in 2025, which implies enormous annual growth of 23%. It is essential for the development of the rest of the areas, such as augmented reality, autonomous vehicles or biotechnology.
  • Electric Vehicles (EV): EV sales increased by 80% in 2021 and 7.2% of the total vehicles sold in the first half of the year were electric. In recent years, an insatiable influx of capital flows can be observed, both public and private, to undertake the investments required for the transformation of the automotive sector (batteries, vehicles, necessary infrastructure, etc.).
  • Biotechnology: This is an approach that has nothing to do with traditional medicine since it treats diseases taking into account the genes and particularities of each person, allowing the treatment of pathologies that until now were not possible. Although it may sound contradictory, the industry has been very negatively affected by the pandemic this year. Lockdowns and restrictions have made clinical trials difficult, as many patients have avoided hospitals and clinics or failed to show up for follow-ups. The outlook for 2022 and the coming years is encouraging, as there is also a large accumulation of early-phase clinical trials that will be announced this year.
  • Blockchain technology and digital assets: The development of cryptocurrencies, Metaverses and NFTs among others, is the greatest exponent of the profound and rapid transformation of companies and society, and above all, where we are heading. There have been many milestones in the sector this year: entry of institutional money (Tesla, MicroStrategy...), launch of Bitcoin futures ETFs, listing of the largest cryptocurrency platform in the world (Coinbase), among others. The opportunity cost of not being exposed to this market is very high, so as we have seen during 2021, new capital flows will continue to enter these assets. In fact, the great correlation that exists between the Stock Market and the cryptocurrency market will remain due to the high volume of capital that the latter moves. Of course, this is an incipient market, so high volatility must be assumed in exchange for being an asymmetric opportunity, in which the potential for revaluation is very high. 

Do you want to reread the first part of this 2021 analysis? Beam click.

Dan Benbunan

Portfolio Manager

Check my LinkedIn. Follow me in Twitter

Head of Investments & Strategy at RBU

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