Is the Stock Market Long-in-the-Tooth?


Is the current market long-in-the-tooth?  Should you pull back because it’s unreasonable to expect the market to keep on reaching new highs?

“Not necessarily,” answers Eric Uchida Henderson, CFA and Chief Investment Officer of East Horizons Investments. (Full disclosure: he’s my nephew, and I don’t pretend to objectivity about him, but even so, read on because he has an interesting story to tell.)

“We’re in uncharted territory,” Henderson explains. “We’ve had 12 months in a row with positive total returns on the S&P500, and the last time this happened was under very different circumstances in 1935.”

Henderson has an eye to history, which he believes doesn’t repeat itself, but quoting Mark Twain, he says, “Often it rhymes.”   When looking at history, he believes the example of the 1990s may be more instructive. “Back then, when we were halfway through the bull market, you could hear voices everywhere clamoring that it was time to get out.”

Conventional Thinking Can Be Remarkably Wrong

Henderson recalls that after six or seven years of US stock gains, investors were getting nervous about the Oklahoma City bombing, the high-profile Orange County bankruptcy and the Mexican Peso devaluation. But with a touch of humor he notes that the popular music group, the Spice Girls, may have been bestowing calming and positive investment advice with their hit “Say You Will Be There”. Henderson says, “If you listened to the popular warnings and sold in 1996, you would have missed an additional three years of appreciation.”

He goes on to say, “In spite of popular belief, bull markets don’t die of old age or high valuations alone. There’s almost always an external catalyst such as a debt or banking crisis, geo-political event or the onset of a recession.”

The fundamentals today, in his belief, are strong as long as there isn’t some triggering event. “We have a healthy global economy, low interest rates and strong corporate profits.  In other words, old age is not a reason to get out of the market.”

An Old Cambridge, New Cambridge View of the World

Where does Henderson get his viewpoints?  His grandfather co-founded both the Sheraton Hotel Chain and the Investment Trust of Boston.  The world of business is in Eric Henderson’s genes.

But the world of Asia is also in his genes.  His mother, Minako Uchida Henderson, was born in Tokyo, and he spent many years living and working in Asia.

He’s the fourth generation of Hendersons to live in Cambridge, Massachusetts, so he’s a part of Old Cambridge.  However, in not only his investment strategies, but also his Cambridge environment, he’s a part of the New Cambridge.

His office in Cambridge, is surrounded by hundreds of start-up companies, but also the mighty tech giants, Facebook, Amazon, Microsoft, Google, and a few blocks away life sciences companies including Novartis, Biogen, Pfizer, and Sanofi.  He’s also situated right between MIT and Harvard.

His clients come from entrepreneurial endeavors such as autonomous cars, software, clean energy, and crowd-sourcing platforms, and that’s in addition to academics and physicians.

Long-term Relationships

His approach with his clients is founded on long term relationships.  Although clients initially come to him for investment advice, the services he provides include such things as being a trustee for their children, quarterbacking dealing with concerns such as their children’s education, setting up foundations, advising on real estate, and even on helping instill the right values for their children.  “Where I don’t have the expertise myself, I have the resources to draw on,” he explains.

His clients use him not only for investing, but also for help with the disruption that occurs when they experience liquidity events.  Interestingly, in the last month, two of his clients experienced liquidity events in the half billion-dollar range. Because of their long-term relationship, he is able to help them navigate this new stage in their lives.

“Often I’m able to cross-pollinate, where I can put clients with liquidity together with clients with growth companies that need capital.  I’m not an investment bank and I don’t get fees for this, but the resulting good will on both sides is part of my business model of life long relationships. It’s part of why we have tremendous client retention.”

To contact Eric Uchida Henderson, you can e-mail him at ehenderson@easthorizoninvestments.com or reach him by phone:  617.401.2704

 


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