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Dear Client, Partner, Prospective Client,  Have we ever had a year where the markets rose with great distinction for the first six months and then proceeded to give back half of those gains in the next quarter?  I’m sure we have, but that’s two very different extremes. Part of the reasoning for this pullback is that bonds have almost never been worse and it’s difficult to find sustainable yields in a variety of instruments.  When money market rates, CD’s and other cash alternatives seem like a better place than bonds, it makes things challenging. Combine that with an inflationary environment slowly improving and you get unsteadiness in the markets.  It appears that the volatility may continue for the duration of 2023 and the talks of a recession for the last two years are being revisited once again.  Tighten your seatbelts as there may be some turbulence before that soft landing, we are all ...

Dear Client, Partner, Prospective Client:  June 2023 finished with a bang and the 2nd quarter was one to remember.  We mentioned in earlier letters that we figured 2023 would be a solid year expecting a 7-12% annual return, and we’ve surpassed that easily with our Core Equity position in the first six months. Big Tech has led the way with Apple, Amazon, Microsoft and Meta leading the way being up to the positive 40% or more.  The Energy, Financial Services and Health Care sectors have disappointed, but we expect them to recover in due time as well. It is important to note the difference between an equal-weighted S&P 500 versus a one that’s based on market capitalization.  The S&P 500 was up almost 15% in the first half of 2023 and an equal-weighted S&P 500 would be up only 2%.  Something to remember as we have a lot ...

Dear Client, Partner, Prospective Client:  That’s more like it!  Yes, things are always sunnier when the markets are going up, right?  After a dismal and tough-to-stomach 2022, things are going well again in the markets in the first quarter of 2023.  The DJIA, S&P 500 and the Nasdaq are all up YTD, and if earnings season (which JP Morgan kicked off today with a pleasant surprise) doesn’t disappoint too much, we may be in store for more gains throughout the year. We talked about annual gains, in our first quarter letter of 7-12% for the year and we are already there, at the lower end of that range, with the S&P 500 up 7.03% as of the end of March.  Much of these gains have been the Big Tech and travel recovery with the likes of MSFT, AMZN, APPL and BKNG leading the way.  Retail is still lagging well behind with inventory issues, but NKE and LULU are trying ...

Dear Client, Partner, Prospective Client,  While 2021 didn’t disappoint with a stock market run-up, 2022 certainly did disappoint logging the worst year for all of the major indices since 2008.  There really was no where to hide, as I touched on it in previous letters, as we dealt with runaway inflation throughout a big part of the calendar year 2022.  The optimistic viewpoint is that the S&P 500 has only been negative or down in consecutive years twice since 1965. Does that suggest we are in for a return to a bull market and good times ahead?  We will see.  This past year saw the collapse of cryptocurrencies and specifically FTX.  We saw cannabis companies, even with favorable and less restrictive legislation, absorb declining valuations and their stock prices were crushed.  The FANG stocks and Big Tech in general had one of the worst years in an exceptionally long time.  They also have some ...

Dear Client/Prospects/Partners:  To paraphrase from our January letter, 2021 did not disappoint, but 2022 has been downright terrible.  Every time we get a few positive days or even a good, solid week in the markets, the wind is taken out of our sails with the continued volatility and downtrodden news of runway inflation, talks of a recession (which are valid) and the rising interest rate environment with has been tough for both equity investors and bondholders.  I have mentioned to most of you for a few years now that we are overdue for something like this recent drop, but I do not think any of the experts expected it to be this fast and harsh.  Here’s an example of why it’s been so frustrating for many investors and managers alike:  Municipal bonds are down -11.6% YTD, REIT’s are down -27%, Preferred stocks are down -17%, the S&P Dividend Aristocrats Index is down -16%, the S&P 500 is down -20.6%, the DJIA is ...

Dear Client/Partner/Prospective Client:  As we make our way into the halfway point of summer 2022, there is some hope with rising inflation subsiding. Gas prices have come down under $5/gallon for the first time in months, which will help keep travelers on the road for their vacations and summer road trips. The Federal Reserve seems poised to raise rates another .75bps in the upcoming weeks and the national average for a 30-year mortgage rate dropped to 5.30% last week, even though home purchases under contract in June, skyrocketed to 60,000 deals being cancelled by spurned buyers. On top of that nonfarm payrolls increased by 372,000 in June, which is a very encouraging sign. Average hourly earnings rose 5.1% from a year earlier and the unemployment rate was unchanged from May at 3.6%. All positive measurements in looking at our economy. The continued talks of entering ...

Dear Clients/Partners/Prospects:  It appears the market volatility we touched on and expected in April of 2021 was one year early.  We are certainly in the thick of it now.  There really isn’t really anywhere to hide as we try to steady ourselves on this bumpy ride we’ve had in the first three months of 2022.  Equities have been a great place to be for many, many years now but markets don’t go straight up either.  We think some pain may well be overdue, and we are going to manage that pain the best we can.  We are continuing to add some new positions and subtracting others (retail in particular) as we navigate through these times.  We also may be increasing our cash position if the volatility continues in the second quarter.  Federal Reserve chairman Powell has announced his intent to raise rates several times in 2022.  This is some of the cause of the volatility in the markets, but rising ...

Dear Client/Partner/Prospective Client:  2021 did not disappoint and it certainly surprised us in a number of ways.  While the WFH (work from home) stocks came back to earth in a major way the stock market growth was quite astonishing.  Back-to-back almost 20% annual gains for the S&P 500.  That’s tough to beat and while we did that in 2020, we weren’t able to match that in 2021.  Much of that came from our technology plays including one large exit, but we also expect a big bounce back in 2022.  Did anyone expect Ford Motor Co. (F) to be up over 150% in any given year? How about Devon Energy, up 179%?   While we had two of the top 5 winners in the S&P 500, we had some missteps too. The electric car and truck market, with Tesla having a corner on the ...

October 11th, 2021 Dear Clients/Prospective Clients/Partners: The markets finished with a whimper in September, down 3-4% depending on the index.  The hot streak couldn’t last forever, and the big tech companies have started to take a beating.  It’s well overdue though, as they have led the way in growth for many quarters now.  We will see if earnings have hit their climax and are stretched or if the September swoon turns into something greater.  Time will tell but it was an interesting and volatile month. Our economy continues to struggle with rising inflation.  Have you been to the grocery store or a Target lately?  Wow!  Prices are going up quickly with no end in sight.  Supply chain issues on just about anything you purchase.  Have you seen the cargo ...

July 8th, 2021 Dear Clients/Prospective Clients/Partners: Happy Summer, folks!  Wow, we certainly have had our share of heat the last few weeks and the markets have been hot as well.  We will take it and I’m sure you will too.  With the S&P 500, DJIA and Nasdaq up more than double-digits at the midpoint of the year, it appears that this continued runup has some legs.  We are entering earnings season and it will be interesting to see if the adjustments companies have made to fixed office costs and employees working from home affects the bottom line.  It will also be interesting to see how many corporations require their employees to come back to their offices by the fall months.  It is certainly inconsistent across Wall ...