CIO believes market response was rational but that investors should pay attention to businesses over stock market
Market response to the pandemic downturn was rational and the world overestimated how many businesses were shut down, according to one CIO.
Gerry Frigon, president and CIO at Taylor Frigon Capital Management, said he spent a significant amount of time speaking to company management teams during the dark days of the crash and found that, in general, they were still functioning.
He said the fact the hardest-hit businesses were those that were the most consumer-facing, and thus visible to the average person, gave the impression to most observers that things were far worse than in reality.
He said: “This is not to suggest that the downturn was not significant, it absolutely was and still is, but it was not quite as bad as was expected - and that is the primary reason that the markets have reacted so positively and swiftly. In our view, the reaction has been quite rational.”
Frigon said the massive amount of government spending gives him serious concern around the role of government in society, adding that there are implications for the “free enterprise system” which are required for companies to thrive.
In the current world, he believes that it is more important than ever to have a very solid sense of the trends that will drive business in the coming years.
“It is imperative that investors pay attention to those who run the businesses in which they invest to be certain they are up to the challenges facing them in the twenty-first century,” he said. “Now more than ever, predicting the business is far more important than predicting the market.”
Taylor Frigon Capital Management’s growth strategy has just experienced the best two months in its history, up more than 23% in the first half of the year. He added that staying invested remains as crucial as ever, as does look at investing in the context of the business and not the stock, or the stock market.
He said: [Our TFCM Core Growth Strategy performance] was the result of painstakingly applying our narrative-based investment approach. Many of our clients have asked us what specifically drove this significant outperformance. We believe what we are witnessing is a recognition, in difficult times, of real and sustainable businesses in core technology, medical technology and financial technology.”
