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In the spirit of continuous improvement, the Antero Peak Group actively reads to further develop perspectives on financial markets and investing, leadership and life experiences. Please see a list of books that have challenged our thinking over the last several years.

The South African government announced an unconventional strategy last week that involved tapping into its gold and foreign exchange reserves in an effort to temper its growing debt burden. While investors initially cheered this financial maneuver, we are more skeptical. Unfortunately the government announced this strategy without clearly outlining the governance of the framework. We break down the transaction and potential drawbacks below:

2024 is expected to be one of the biggest election years on record with more than half of the world’s population planning to go to the polls. This busy election calendar comes at a particularly opportune time as geo-political tensions are running high across the globe.

The EMsights Capital Group held their annual research retreat in December. For two days the investment team gathered off-site to recap the events of 2023 and look forward to 2024. This year’s agenda also featured several outside speakers ranging in expertise from the Russia/Ukraine war to the current health of the US economy.

Over the course of the two days, the team identified several cross-regional trends they expect to remain prominent in 2024:

In our previous blog post “Narrow Leadership Creates Opportunity”, we highlighted the attractive valuations of US mid-cap stocks, which are at their cheapest levels relative to large caps in over 20 years. As value investors, we distinctly understand the importance of starting-point valuations for forward returns, however you don’t have to be a value investor to appreciate the asset class’s appeal.

Since 1979, the Russell Midcap® Index has outperformed both the Russell 1000® and 2000® indices (Exhibit 1) on an annualized basis by 0.8 percentage points and 1.9 percentage points, respectively. While that may seem small, the power of compounding can result in large differences as one’s time horizon expands.

On Sunday, November 19, Argentina elected Javier Milei to be its next president in a decisive run-off election. Radical libertarian outsider, Milei, defeated Sergio Massa, the country’s Minister of Economy since August 2022. Voters, investors, and business owners are hopeful Milei’s libertarian policies, which are a drastic divergence from the current policies, will aid Argentina’s recession-prone economy. The country is currently facing inflation topping 140%, interest rates at 130%, dwindling central bank reserves, and a weakening currency regime. However, the grass may not be greener on the other side. Implementing Milei’s policies will be a challenge without a congressional majority, and his abrupt, “chainsaw” approach may backfire. Even Taylor Swift's Eras Tour, which visited Buenos Aires last week, could not boost this economy—is there anything that can?!

The US equity market’s narrow leadership in 2023 is well chronicled, but it’s nearly impossible to overstate.  The “Magnificent Seven”, as the largest seven US stocks have been dubbed, have dominated YTD equity returns—contributing, in effect, 100% of the S&P 500 Index’s total return (through October).

These seven stocks have returned on average 84%, compared to -3% for the “S&P 493”, and more than half of S&P 500 stocks have generated negative returns. In fact, the equal-weight S&P 500® Index is lagging the market-cap weighted S&P 500 by the most since 1998 as the S&P 500 Index is up over 10%, while the equal-weighted S&P 500 was down ~2% through October.

EMsights team members returned to Washington, D.C., in April for the IMF and World Bank Spring Meetings, conducting some 200 interactions with a swath of government officials and representatives. Frequent readers will recall we similarly attended the IMF and World Bank Annual Meetings last fall—and were unsurprised by the somber mood, given ongoing macro and geopolitical uncertainty.

The Growth team has consistently found health care to be a key area of idea generation given the existence of companies with attractive franchise characteristics experiencing interesting profit cycles. From a franchise standpoint, many health care companies enjoy defensible competitive positions through intellectual property protection, strong brands or leading market share positions. From a profit cycle standpoint, this is an area of constant innovation, and innovation tends to breed profit cycles.

EMsights Capital Group believes that economic and political freedoms and rule of law are important precursors for the economic development, growth, education and sustainability of sovereign countries. Through active due diligence, including on-the-ground country visits, in-person meetings with political, business and government officials, and daily monitoring of political and financial news, we actively follow a country’s pursuit and execution of fair and free elections, civil liberties, functioning of government, and the importance it places on economic freedom in real-time – in both its rhetoric as well as its enforcement of these principles.