Buying Into Fear

'Tis the season to be nervous; 'tis the season to be fearful. As I pointed out yesterday, September was an awful month. But if there is a silver lining in this dark cloud, Consuelo Mack explores it in this week's edition of her PBS program WealthTrack as she interviews Rob Arnott about an age-old strategy: when everyone else is selling, we should be buying.  In other words, buying into fear.  Hope everyone is enjoying the weekend.  

Buying Into Fear

September 29, 2022

Dear WEALTHTRACK Subscriber,

Volatility is the name of this market’s game. The Dow and S&P 500 both entered bear markets this week, although they both put up a brief fight with a robust rally on Wednesday. Yields on U.S. Treasury securities also bounced around. The benchmark 10-year Treasury note briefly breached 4% for the first time in more than a decade,  before experiencing its biggest one-day drop since 2009. The 10-year’s yield settled at 3.747%, its third highest close this year. And 30-year fixed rate mortgages are now at 6.7%, the highest they have been since 2007.

These stomach-churning moves are hard to ignore unless you can take a longer view. This week’s guest is focusing on bigger investment themes and identifying cheap global sectors as the market sorts things out. 

A year ago on WEALTHTRACK, in September of 2021 Research Affiliates’ Rob Arnott made two macro observations. One, he predicted there were “very high odds” of a resurgence in inflation. Two, that the multi-year outperformance of growth over value stocks was probably finally over. He dated the turn to August of 2020. 

He proved prescient on the inflation call and so far seems to have gotten value’s comeback right. 

Rob Arnott is Chairman of the Board and Founder of Research Affiliates, which is celebrating its 20th anniversary this year.  Research Affiliates describes itself as a “research intensive asset management firm that focuses on innovative products.” Among the innovations that Arnott has pioneered is fundamental indexes: building indexes with stocks weighted on the size of their fundamentals, such as sales, profits, cash flow, book value and dividends - not traditional market capitalization. He was awarded the prestigious William F. Sharpe Lifetime Achievement Award for that innovation. Since then Research Affiliates has created numerous fundamental indexes for a wide variety of markets and asset classes around the world. 

Among the many funds that Arnott created and now co-manages is the PIMCO All Asset Fund, also celebrating its 20th anniversary this year. The nearly $15 billion fund was a pioneer in investing in a wide range of assets through various mutual funds, in this case, PIMCO’s. And it has achieved its goal of delivering returns of five percent above the Consumer Price Index over full market cycles for most of its 20-year existence. 

In this weekend’s interview, Arnott shares his outlook on inflation, value stocks and his cheap diversifiers strategy. We also have an exclusive EXTRA feature with Arnott who will discuss his penchant for high performance motorcycles, including his most recent acquisition.

If you miss the show on public television, you can watch it on our website over the weekend, along with all of our past programs and our guests’ One Investment recommendations.  You can also find the WEALTHTRACK podcast on Stitcher and SoundCloud as well as iTunes and Spotify.

Have a super weekend and make the week ahead a healthy, profitable and productive one!

Best regards,

Consuelo