e-fundresearch.com: “The great return of market volatility”: What are your personal lessons learned from year-to-date market developments?
Alexander Farman-Farmaian: The lessons are that volatility never stays quiet or low for ever! The reason for the current volatility seems to be the realization by investors that higher U.S. Central Bank Fed Funds interest rates are having an impact on slowing the economy domestically, as well as internationally. While not a great surprise that “one should never fight the Fed”, the upside to the volatility is that we will be using the wide price disparities to reposition and optimize any stocks that we feel might benefit from such moves. Remember, that Volatility = Opportunity! That is especially true for the prepared and for those that have done in-depth research!
e-fundresearch.com: With regards to the coming year: How optimistic is your view into the future and what obstacles and challenges should investors be prepared to overcome? What key-developments that you are focusing on the most and how do you separate noise from relevant information?
Alexander Farman-Farmaian: I believe that the next few months could continue to be challenging due to the Fed staying on course to raise interest rates from 2.25% to some 3.00% as they have stated. That will continue to drain liquidity from global markets. Add to that factor in 2019 the U.S. will not have the benefit of a massive corporate tax cut that boosted reported profits, like it did this 2018 year. Once interest rate peak and the economy has slowed enough, the U.S. stock markets could rally back hard again on expectations of a reacceleration in economic activity and corporate profits.
e-fundresearch.com: Why should investors consider an increase in allocation to your asset class and in particular your strategy in the current environment?
Alexander Farman-Farmaian: The before mentioned scenario should and could lead to steady growth, less cyclical stocks to outperform and even appreciate. This would happen as investors move to more “safety and certainty of underlying continuation of corporate profit growth”. It pushes investors into more stable and less economically sensitive sectors in the stock market, like it has done all year until the end of September 2018. This should benefit growth investors during this period of volatility and uncertainty. We believe your portfolio should therefore do quite well and outperform under these conditions.
ALEXANDER M. FARMAN-FARMAIAN
Partner, Vice-Chairman & Portfolio Manager
Alexander Farman-Farmaian is Vice Chairman, Partner and Portfolio Manager at Edgewood. He joined in January 2006 and helped implement the current valuation approach of the Edgewood Investment Committee. He is an analyst on portfolio companies, served as Director of Research, and produces the “Economents™”, a periodic economic and financial markets update for clients. Prior to joining Edgewood, Alex was for 19 years a senior member of the Portfolio Management team at W.P. Stewart & Co. where he chaired the Investment Oversight Committee. He is a member of the Council on Foreign Relations (CFR – NY), the World Presidents’ Organization (WPO), and serves as a Trustee of the International Women’s Health Coalition (IWHC), an organization that promotes access to health services and fundamental human rights of women and girls around the world. Alex also serves on the Board of CollegeSpring, a non-profit which educates low income high-school children in SAT college entry testing. Alex was formerly President of the Princeton Club of New York, is a member of the Economics Club of New York and is on the board of Kalinat S.A., a potato chip manufacturing company in Caracas, Venezuela. He received a BA in Economics from Princeton University in 1987, and speaks fluent French, Spanish, Farsi and conversational Italian.
