It is really hard to focus on anything economically without including the war in Ukraine. Really hard. Why? Because the set of knock on effects are so wide ranging and large, both known and unknown, that many or most businesses may be impacted.
With commodities not just rising, but skyrocketing – a recessionary force is virtually guaranteed now. M&A typically is deeply cyclical, being highly active in the most frothy of times and dead during periods of deep negativity and uncertainty. The small / medium cap IPO or SPAC market has been virtually shut for almost three months now. Large scale M&A is almost certainly slowing down.
I’ve been keeping watch on a number of banking businesses, because they have great founder managers, pay out a large share of their earnings as dividends, and trade at lower multiples due to cyclicality and human capital flight risk (e.g., your assets can walk out the door, literally).
Their stock prices have fallen dramatically. They will likely go from peak earnings in 2021 to more trough-like earnings in 2022/2023. Some have countercyclical units such as large restricting teams.
In any case, I’m taking a cautious stance to purchasing these securities as I think the odds of a recession are growing by the day. But if a recession becomes fully priced in by the market, these stocks may overshoot dramatically on the downside and present good buying opportunities.