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GARY Top Ten: Yield investing in a bear market

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We are in a bear market with rising risk of stagflation/recession. It’s natural to blame the Ukraine War as it’s the latest negative catalyst. But the reality is that the structural problems were there before and was continuesly ignored. End of 2019, the world was facing global recession cycle and pandemic was the catalyst that drove the spiral down. It was easy to blame the pandemic and ignore the structural problems. Similarly we are doing it again. Central Banks are moving more 12-18 months too late. They are raising rates into weakening economic growth cycle with elevated inflation and asset bubbles in almost all categories. 

US Fed playing catch up to the Bond Market

The other side of the monetary stimulus is the balance sheet expansion. The currency war has already started to shrink the aggregate balance sheet of the three major Central Banks while US Fed and ECB are flagging to starting shrinking it as well. Bear market cycle will continue with rate hikes and balance sheet reduction.


Market performance is highly correlated to Central Bank Balance Sheet cycle

Yield investing without growth will lead to value traps in a reflation cycle with recession worries. The GARY (Growth At Reasonable Yield) model offers exposure to the best 10 stock ideas that manage growth, value, yield and risk in the current volatile markets.

The GARY Top Ten at the end of May 2022: Amcor (AMC), Brambles (BXB), Challenger (CGF), Elders (ELD), Evolution (EVN), Regis Resources (RRL), Insurance Australia Group (IAG), QBE Insurance (QBE), Telstra (TLS) and Woolworths (WOW). DDA may or may not have made changes to the model holdings since the end of May. We continue to see the cycles changing and the model portfolios evolving with that.

Risk managed GARY keeps delivering in a bear market…performance chart above exclude dividends.