Interest Rate and Investor Behavior
Last week, a “controlled accident” happened.
This is what we call “monetary policy” at the Club.
When such change happens, a lot of people who are not used to investing, remain frozen, trying to gain confidence and understanding.
Their actions may follow after the movement, in what is called a “feedback delay” or “lag.”
Other investors refuse to act altogether, just because they think they are right as long as they “wait and see”.
On the contrary, good investors know that that’s an illusion, too. That even waiting offers no security. There is no security at all. You have to face the fact that everything is in flux and go. Go, go, go with it.
What happened?
The interest rate seems to have stopped rising, and the biggest drive of lower prices in private assets may have finished exercising pressure on valuations. Our market is a leveraged play on duration, meaning that it could perform nicely from here, above, in the scenario that the fastest interest rate rising cycle ever in the history of the U.S. may be followed by a rapid and systematical lowering of the benchmark interest rates, helping to increase liquidity in our market, encourage lending, and boost investor confidence, potentially leading to a strong recovery in valuations.
So what?
Well, that depends on their stage of growth, as the macro-environment really affects the late-stage names and far less the early-stage names.
We think that the best way to benefit from the current market setup is to increase exposure to a few selected, late-stage names that have a chance of performing well in the macro-environment:
Automation Anywhere, Addepar, Anduril, BlaBlaCar, Boxabl, Boom Supersonic, Bitpay, OpenAI, DataRobot, Flexport, Epic Games, Impossible Foods, Instacart, Kraken, Plaid, Stripe, Ripple, Rubrik and Space X.
What is IPO CLUB
We are a club of Investors with a barbell strategy: very early and late-stage investments. We leverage our experience to select investments in the world’s most promising companies.
Disclaimer
Private companies carry inherent risks and may not be suitable for all investors. The information provided in this article is for informational purposes only and should not be construed as investment advice. Always conduct thorough research and seek professional financial guidance before making investment decisions.
