GARY Top 10: Yield investing in a bear market

Mathan Somasundaram

Deep Data Analytics

We are in a bear market with a 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 were continuously ignored. 

At the end of 2019, the world was facing global recession cycle and the 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 than 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
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 start 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
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 10 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) 
  • Woolworths (WOW) 

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

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10 stocks mentioned

Mathan Somasundaram
Founder & CEO
Deep Data Analytics

Over 25 years’ experience in the finance/tech industry. Mathan has worked extensively in all parts of the finance sector (i.e. County NatWest, Citi, LIM, Southern Cross, Bell Potter, Baillieu Holst and Blue Ocean Equities). Currently Founder and...

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