2015 Selloff Offered Fear and Opportunities

Tim Armour became Chairman of the Board of Capital Group in July 2015, after the untimely death of Jim Rothenberg.

Timothy Armour began his investment management career with Capital in 1983, through the company’s Associate Program. His first position was that of an equity investment analyst. Through his 30 years of service with the company, Timothy Armour slowly moved up the ranks as he honed his skills and knowledge in investment management. And, unbeknownst to him, the experience and knowledge of the market was going to help him to keep a cool head during the tumultuous times of 2015.

In August of 2015, just one month after being named Chairman of the Board at Capital, a major selloff hit the market. First, let’s explain what happened during the selloff. At the opening bell the Dow dropped a 1000 points, a major drop that has never been seen before. Other markets around the world saw huge declines. The reason for the drop came in two steps.

Related: https://www.ft.com/content/3642213e-308e-11e5-8873-775ba7c2ea3d

The first hint of problems was the slowing of China’s economy. Their statements of economic growth of 7% was overstated. Then China devalued their currency. That was the red flag that spooked the markets, causing the fear factor to rise and the markets in the US and around the world in a downward tailspin.

What was Timothy Armour’s view of the situation? His first assessment was that the market had been in a bull market for the past 6 years and a correction, though painful to many, was not unexpected. Moreover, the periodical correction of the market is healthy. At the time of the selloff, many of the stocks were greatly overstated. Thus, this adjustment helped to remove those pockets of excess.

Timothy Armour felt that the reforms that China implemented would cause growing pains for their economy because it was in the process of transitioning from a closed-focused investment economy to an open-focused economy. What was his advise to weathering this turbulence in the market? He stated that investors should be prepared for a rocky transition, and in the meantime, it would be wise to invest in strong companies until the rocky times in the market became more stable.

Moreover, he felt there were areas of opportunity for investors. For example, the Chinese Internet companies presented buy opportunities within China, as well as, those same companies based in the US.

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