1Q 2022 Outlooks from the Calamos Investment Team

Introduction from John P. Calamos, Sr.

Founder, Chairman and Global Chief Investment Officer

During the fourth quarter, the global economy extended its impressive but complicated recovery. By and large, corporations shared encouraging earnings growth announcements and guidance. US consumers remained a force with which to be reckoned, supported by solid household balance sheets and a strong labor market. From a regional perspective, US economic data was the most upbeat with more mixed trends in Europe and China.

The persistence of the Covid-19 delta variant and the emergence of the omicron variant triggered new restrictions around the world and rekindled fears about the road forward for the US and global economies. Inflation worries deepened amid growing indications that rising prices would not be as transitory as many—including the Federal Reserve—had anticipated. Investors also grappled with the potential for a Fed policy misstep as the central bank communicated its intentions for tapering and tightening.

In this complex macro environment, markets were volatile and rotational. When the dust settled, US equity markets led the way for both the quarter and year. Large cap stocks outperformed small caps as investors sought the perceived stability offered by more established companies.

In 2021, conditions in the convertible market proved quite unusual. Over the long term, convertibles’ hybrid stock-bond characteristics have provided an attractive level of upside equity participation and downside risk mitigation, as well as resilience during rising interest rate environments versus traditional bonds. Although the convertible market advanced and outperformed traditional fixed income securities in 2021, we did not see the same level of upside equity capture as we would anticipate in a rising equity market. In large measure, this is attributable to the nature of the equity market rally and the composition of the convertible market. As noted, in the uncertain environment of 2021, investors favored large-cap stocks over smaller companies, particularly smaller growth companies. Meanwhile, the convertible market included a larger representation of these smaller names.

In no way does the relative underperformance of the convertible market in 2021 change our view of the long-term opportunities that convertibles offer. For example, through 2020’s unprecedented volatility and during the 2020- 2021 pandemic period, convertibles have provided powerful tools for our active approach—as they have through other full market cycles.