Market Insights

Time To Persevere -- 2023 Investment Outlook

Perseverance is an underrated trait. As investors, it is almost always smarter to focus on long term performance and not obsess over short term volatility. But 2022 tested this investing tenet. First of all, an entire year is not really so short term. 2022 saw investments of all kinds, including most bonds and stocks, decline significantly. People saw their net worth decline as long term, profitable holdings like Apple (AAPL), Amazon (AMZN) and other tech stalwarts fell in value, in some cases, by 30% or more. Anyone who tried to reach for yield prior to the summer of 2022, saw bond values also decline precipitously. There were few places to hide as even cold, hard cash was steadily eroded by inflation of over 6-7% in goods and services that we purchased throughout the year. If you sold long time holdings in taxable accounts, there was the added hit from capital gains taxes of 20% or more now due on those gains.

But even in years like 2022, in fact especially in years like 2022, the work of investing and saving must go on. The research continues, attempting to understand developing industries and businesses continues, and, most of all, matching individual financial needs and goals to a changing economic and business environment continues unabated throughout the turbulence. That means understanding both short term cash needs and longer term wealth needs. That means looking at and through portfolios to make sure they are diversified against unforeseen events but not so watered down as to simply echo often overpriced stock market indices. It also remains important to have opinions -- about the economy, business trends and specific company prospects, even as those opinions must be flexible enough to respond to changing facts.

As 2023 unfolds, we already have experienced a quick burst up in stock market indices followed by a slight decline. The headlines are once again blaring about this or that potential disaster, economic, political or otherwise. But remember that the media literally profits off of gaining eyeballs and thus has every incentive to hype short term concerns and amplify worries not clarify probabilities. At Arrival Capital, we choose to start 2023 by building on what was accomplished in 2022. We stay nimble to avoid long term capital destruction. We continue to deploy cash, raised by selling expensive tech stocks last year as the Federal Reserve raised interest rates and deflated values of future cash flows, into suddenly high earning short term fixed income. We are also stepping back into stocks of profitable and growing enterprises in many types of industries as long as the value has been made compelling; particularly by price declines fed by short term fear instead of a sober analysis of a business' likely future prospects.

"Inflection point" is often an overused term. But three years after the onset of the COVID-19 era of fear, unimaginable money printing, supply disruptions, supercharged inflation and unprecedented interest rate policy, it is fair to say that one door is closing and another economic cycle is upon us. It is also not an overstatement to say how you position your wealth in this time of change is crucial to your financial future. How much exposure to have to the dominant tech stocks of the 2010's, how to adjust a portfolio to the permanent changes the pandemic has brought, and what new percentage of wealth should be allocated to fixed income that can now generate meaningful interest income? Arrival Capital exists to help investors adjust to the emerging economy and ensure they have the resources necessary to thrive in a complex world. We help you persevere for the better times ahead.

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