Market Insights

The Longest Journey -- Arrival Capital's Investment Guide to 2023's 2nd Half and Beyond

July 15, 2023

At our firm website,, you can find a detailed description of our investment approach. We highly recommend reading it to know how we look at constructing portfolios, picking stocks, and managing client capital for the long term. But this quarter's investment guide starts at the very beginning. Our title "the longest journey" should be followed in your head by the familiar add-on, "begins with a single step." Why is this pithy bit of ancient philosophy relevant to investing? Not only because almost everyone who first finds themselves with a surplus of money needs to think about what to do with it, but also because even experienced investors wake up every day to take that next single step on their continuing investment journey. OK, you might be thinking, since I am a long term investor, I already took that first step years ago. Why I do need to worry about the next step? The answer is that the long term plan sometimes comes face to face with a present reality of economic distress or personal hardship that shakes up almost all of us at some point. The long journey's destination sometimes seems rather remote when compared to a present fraught with real problems and concerns.

The theory is straight forward. Over the last 100 or so years, stocks have gone up, on average, at about 8% per year. On rolling ten-year periods over that time span, except if you were unlucky enough to invest everything right before the Great Crash of 1929, stocks have gone up over every one of those rolling ten-year periods. So set it and forget it, right? Unfortunately, it's not so easy.

First of all, as we take each single step on our long journey, some of those steps can feel awful. "Watch out for that first step, it's a doozy", is another piece of philosophy you may be familiar with. Whatever the long term returns we are sure are out there, each day we are bombarded by media reports, politicians and other pundits about why things are lousy and getting worse, either for the economy, the world or specific companies. A down market can feel painful every step of the way, and causes the historical record of a hundred plus years of investment gains to be questioned, if not by us then everyone around us. That makes the investment journey harder than most.

A second important impediment to our long term investment journey apart from overall volatility and the crises we are inevitably confronted with, is that the specific investments we make can lose value and/or relevance over time. Even the greatest companies and industries (need a typewriter, anyone?) can falter as the years go by. Entire stock market indices are not immune, witness the tech meltdown in 2000, and the 30% plus decline in the NASDAQ in 2022. Stocks, in the broadest sense, should go up over time, but not every stock in every industry. Some will wither and decline. Therefore there is another task on that investment journey as we keep moving forward -- watch out for pitfalls along the way.

Finally, perhaps the most difficult part of the long term investment journey is that our own circumstances may also change. We may need some of that cash, for a house, for college, for healthcare. That brings to mind a further complication, we simply do not know when the journey ends. Not to be maudlin, but in middle age and beyond we (hopefully) do not know for sure how long our retirement will be. That can make severe market corrections like we saw in 2022 even scarier.

OK, now it's time for the investment guide we promised for the second half of 2023. But rather than a guide that says buy this and sell that, what we think investors need is a guide in the sense of someone escorting you safely on your journey. Arrival Capital seeks to be that kind of guide for our clients. Not everyone needs a guide but having that trusted voice to accompany you can make all the difference, whether in bad markets like 2022, when an investor might be tempted to liquidate everything with risk attached, or a time like July 2023, when the chorus of media voices might tempt you to throw caution to the wind and put more and more capital into "AI" stocks, even as many of those large tech companies with AI exposure are undoubtedly great companies and have been and continue to be key client holdings.

As we take our next investment steps in the second half of 2023, the first thing a guide would check was if you had the right equipment, which in this case means a diversified portfolio, a six to twelve month cash reserve to meet expenses so you don't have to sell into a sudden down market, and a longer term picture of family financial needs. Once this is in place, a good guide would suggest investing in the industries and companies that are undervalued at today's prices, either because of unappreciated potential, even for today's tech stars, or undue pessimism, for companies that have been buffeted around by COVID and its aftermath, and other short term issues that have created the more classic value-based opportunities in industries such as industrials, retail or materials.

As we undertake our continuing investment journey, we can see last year's gloom, and last March's fear of bank runs, receding into the past, like a mountain climber looking at far away thunderstorms that no longer threaten. What lies ahead is likewise eclipsed by a sudden surfeit of optimism that we can avoid recession on the back of technological advancement and the lessening of inflation. That may be the case, but we must still be on guard for overconfidence as well as new opportunities. There is always something to worry about just as there is almost always something promising in the investment world. Arrival Capital stands ready to be your guide, keeping you on that journey to financial independence and security, one step at a time.

Have a great summer!

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