April 1, 2022
What a long, strange trip it’s been[i]. Two years ago, we were learning more about a Corona Virus—and it had nothing to do with Corona Beer. My boating friends and I celebrated St. Paddy’s day 2020 in some very crowded bars in downtown Annapolis—and two weeks later, we sat in a circle on a Kent Island dock separated by at least 10 feet so that we would miss the “rona.”
We’ve gone through two years of the ebbs and floes of Covid, new variants, new waves, new restrictions, and new regulations. Then the 2020 Presidential Election—turned into a bitterly partisan and contentious event that still separates many families and friends. COVID, and the politics of the election, sparked a 40-year high inflation spike—with, I think, at least another 12 months of that on the horizon. And of course, this last month, we see the brutal Russian/Ukrainian war—which will only fan the inflation fire. And as icing on the cake, add multiple violent protests throughout our country, and we have had, to put it mildly, a very eventful start to the 2020 decade.
In the investment world, this is the very definition of volatility, and you would be excused if you are suffering from volatility fatigue. I know I am. But, regarding our portfolios and long-term investment plans, the past two years (we could say 27 months), and all the unique things mentioned above, are absolutely, positively, and categorically irrelevant! Will we even remember these things in 10 years? I’m sure we’ll not forget COVID and Ukraine. But even today, we hardly remember when Russia invaded Chechnya (twice) in 1994 & 1999. Or Georgia (2008.) Russia is being Russia—it’s not good being their neighbor.
Do we even remember that in 2011 equity markets dropped 20% in six months? They did. Back then, it was a raging government debt crisis in Southern Europe (think Greece and austerity), a threat of a US Government shutdown (again,) and the S&P downgrading the debt ratings of the US treasury (did it ever get better?) It’s hard to remember—it looks pretty minor now, but I had some restless nights. Looking at 2011 from 2022, did that 20% drop in equities affect our current portfolio? Well, only in a good way. We reinvested dividends and bought equities at price discounts we’ll probably never see again.
This year is off to a lousy start—true enough. Will it affect our portfolios in 2032? Again, only in a good way. But, let’s see how poorly the markets have done since January 2020 (before the long, strange trip) and March 31, 2022—yesterday’s close.
On January 1, 2020, the S&P 500 closed at 3,244, and on March 31, 2022, it closed at 4,530. So while the world has changed dramatically, the 505 companies that make up the S&P 500 managed to turn a pretty healthy profit, as have our investments.
The bottom line is that the world is constantly changing. The 20th Century is as good an example of that as any in history. It is always something. Every generation has its burdens. The only consistent thing we can count on—besides death and taxes—is the relentless upward growth of superior companies. Companies that innovate around, and navigate through, all the crazy events and hurdles humans and their governments can conceive or create.
This year’s slow start? The S&P is down 5 to 6%; it too shall pass.
Thanks for reading. Keep your heads up–have a great week, and please give us a call if you have any last-minute tax questions. Or, if you want a little reassurance, give me a call, and we’ll go over things. MK
[i] Words immortalized by Jerry Garcia and the Grateful Dead in the song “Truckin” 1970
