Winter in New York has definitely descended upon us this week, with bone chilling temperatures under crisp blue skies forcing New Yorkers to crouch into the wind; hats, scarfs, and bulky winter jackets offering only a little relief from the cold. It can be tempting to think ahead (or back) six months to the warmth of July when the sun shines till after eight and the balmy outside air invites us for a long stroll or run. But we can’t and shouldn’t wish away the next six months. As I recently reminded my daughter, each day should mean something, even if it isn’t summer vacation, or a beautiful Spring afternoon. Make the winter days count, learn something new, study, experience life.
It is kind of the same with the stock market and financial markets in general. Things are now stressful and volatile. The easy markets of mid-2018, when stocks seemed to rise every week, with little angst, are long gone, with an unclear return date. Many market favorites and the biggest holdings of the stock index funds have lost 20% and more of their value. During turbulent times, it can be tempting to get into a financial crouch and pull the proverbial covers over our heads, raising and staying in cash. Instead, I would advise investors to wade into markets such as these to find the long-term opportunities that have been created by short term fear and anxiety.
As of Christmas Eve 2018, stocks were down 20%, Winter, in the form of a Bear Market, had arrived. Of course, there is nothing magical about 20% down. In 2008-09, stocks declined more than 50% from all-time highs.
But a market down 20% undoubtedly has opportunities that a market at all-time highs did not. Worries abound – about trade, political impasse, an aging business cycle, debt – but business goes on. Certain companies may be just hitting their stride while others might be on the verge of a turnaround. Technological advances, demographics and other factors can create winning investments in the right businesses with good managements, brands and know-how. But to find these investments, you need to pull off the covers, put aside the anxiety caused by an imperfect world, and do the work.
At Arrival Capital Management, the goal is to provide clients with active, value-based investment management. We get to know our clients, their risk tolerance and financial needs, but then we match that to the investment world as we find it, not as we wish it would be. For that same reason, we eschew stock index funds, because simply piling on the averages and the biggest stocks cannot be a substitute for seeing where the world and business is going as opposed to only where it has been. In times such as these, it is important to engage on a daily basis even with scary markets, because that is often the best time to find the investments that make the most sense going forward and provide financial security for the future. Summer and better markets will eventually return, but it is in these difficult times that it pays to plant the seeds of long-term value with opportunistic investments today. At Arrival Capital, we are here to help. Stay warm.
Jay Rosenberg, Principal, Arrival Capital Management LLC