Expert Panel Talks China, Inflation And The Importance Of A Stock Selection Process

At the Benzinga Reopening Stocks Summit on Wednesday, a panel of experts discussed macroeconomic factors investors need to be monitoring closely, the importance of the stock selection process and what economic indicators are most relevant in today’s market.

The panel included FERN Impact Partners LLC CEO Sandra Myburgh and CIO Kristin Carlin, and White Lion Capital LLC founding partner Sam Yaffa and founding partner Dmitriy Slobodskiy.

All Eyes On China: For now, Myburgh said she is most closely watching the ongoing impact of the delta variant of COVID-19 and the potential for supply lines to get squeezed due to economic disruptions in China.

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“Obviously that will have a transmission effect on higher inflation. And then from a Chinese regulatory landscape, China has come up with some very big nationalization-type announcements that just came out. What’s interesting here is if you just look at what’s happening in the education sector, some of those names have lost two-thirds of their value,” Myburgh said.

Yaffa said Chinese regulators are attempting to keep up with the economy’s unprecedented growth.

“If you look at the modern-day cryptocurrency market, of what the U.S. regulators are dealing with, they could never have expected it to grow at such an insane rate that it did. It’s almost the same thing going on in China,” Yaffa said.

Yaffa also said investors should be monitoring the collapse of the Afghanistan government.

“What’s really interesting is that China actually recognized the Taliban as the new government system over there. So there’s a whole bunch of things going on around the world that are just complete black swan events, and this should also be taken into consideration with your investment criteria,” he said.

Inflation & Stimulus: Slobodskiy noted that many investors are taking a very bearish approach toward inflationary risk.

“While CPI is inching higher and inflation is following suit, you’re going to see asset prices rising as well,” he said.

Yaffa said the “big three” economic indicators investors should be monitoring are the CPI, monetary base and M2 money supply.

“Stimulus is a double-edged sword. On one hand, as we see with the monetary base and CPI, there are additional U.S. dollars stimulating the economy … however, on the flip side of all of this stimulus is how are we going to pay for these printed dollars?” Yaffa said.

Inflation, more debt and higher taxes are three potential options for paying back the new national debt.

Stock Selection Process: Carlin said one part of the market benefiting directly from U.S. government stimulus is the alternative energy group.

“It’s very difficult to pick the winner in the EV area, which is why we also look to expand that and look at the parts that go into EVs, charging stations, battery components, technologies that go into the EV cars. We often find that what we do is once we’ve picked a sector ... we then identify the strongest candidates within that sector as well as the parts that support that sector or area, Carlin said.

FERN Impact has a proprietary system for scoring potential investments that include factors such as fundamentals, ESG impact and stock technicals. She said technicals usually indicate when a stock has gotten too hot, which is a phenomenon EV stocks have experienced in recent years.

“We are very selective in our process and we have a very process-driven way of picking stocks,” Carlin said.

Watch the rest of the panel discussion with FERN Impact Partners and White Lion Capital at the Benzinga Reopening Stocks Summit at this link.