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Emerging Manager Spotlight | March 2014

The Fear Pendulum: From the End of the World to Market Melt-up

Jeffrey Bronchick, CIO, Cove Street Capital in Los Angeles

Each month we focus our research spotlight on thought leadership from one of the leading investment managers in our program. While the topical subject and type of research can vary each month–ranging from investment strategy and quantitative research to economic views and currency forecasting–you can expect to find content that is refreshing and that sparks debate. The articles underscore our commitment to intelligence, as we believe thought leadership is critical to delivering each client’s desired outcomes.

March 2014

Kai W. Hong, CFA
Managing Director & Chief Investment Strategist

Following the dramatic run-up in most equity markets in 2013, the directionless nature of trading early on was to be expected. Macro weakness in China and some earnings disappointments triggered a sharp sell-off in the markets at the end of January, but expectations for better economic growth and a “clean” suspension of the US debt limit for a year gave further impetus to buying for most of February. Political turmoil in Italy, Turkey, and (more bloodily) Ukraine only served to dampen enthusiasm slightly. In early March, sentiment turned sharply on the Health Care (Biotech) and Technology names that had been leading, volatility increased, and returns were choppy.