Friday, Mar 5th 2021

Spring cleaning

Commentary

This past week, markets saw another bout of volatility as stocks fell 3%. We saw lots of hand-wringing over rising interest rates as Fed chair Jerome Powell shrugged off concerns around rising inflation.

Markets reacted negatively as they were likely looking for more aggressive posturing, but for us, we remain intently focused on the underlying fundamentals of the companies we own, which remain stronger than ever.

After a blistering ~20% rally over just the past few months, we view this recent bout of volatility both as a source of opportunity, and as a healthy mechanism to level-set expectations and clean out speculative behavior in certain pockets of the market.

Our portfolios remain fully hedged and we intend to continue to take advantage of these dips to size up our positions in both Flagship and Opportunities.

As we've discussed previously, rising rates can have an outsized impact on the companies whose growth prospects are strongest, as they tend to have most of their value baked into the out years.

While this means those companies are impacted the most during periods of rates-driven volatility like we saw this week, over the long term, these companies remain the best positioned to capitalize on the biggest secular drivers of future economic growth.

As the Fed and broader markets continue to play their cat-and-mouse game around interest rate expectations, we expect volatility will continue to persist in equity markets.

In the interim, we'll continue to monitor the markets for newly-minted bargains and will look to capitalize on any opportunities that may be offered up as a byproduct of broader market volatility.

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