July 1, 2022

The first six months of 2022 saw the S&P 500 decline 23.6% from its all-time high at 4,796.56 on January 3 to a closing low (so far) of 3,666.77 on June 16.  The S&P “officially” hit bear market territory around June 13, when it ended the day 22% below that record high on January 3.[i]  The Index finished its worst first half since 1970 at 3,785.38.

More noteworthy even than the extent of the decline was its gathering violence: in mid-June, when we stumbled into bear territory, the market ran off a streak of five out of seven trading days on which 90% of S&P 500 stocks closed lower.  That’s a bad run, to say the least.

Now, let’s stop right there.  Regardless of any other points, I’ll make in this newsletter, the most urgent should already be clear.  Simply put, the best way to destroy any chance for lifetime investment success has historically been to sell one’s quality portfolios into a bear market.  But to sell when investor sentiment is sufficiently negative to drive 90% of S&P companies lower on five out of seven trading days—that is, to sell when everyone else is selling—must strike us as the height of long-term folly. Read More

May 1, 2022

Welcome to May—we bid a not-so-fond farewell to the first third of 2022.  In my mind, everything before summer is a prelude.  And while we have another 51 days of spring, the weather turns remarkably better in May.  In the markets, not so much.  From 1950 to 2021, May is the fifth-worst month for returns, averaging just 0.17% gain, with 43 up years and 29 down.  (February, June, August, and September are worse, with September being historically the worst month of the year with an average loss of 0.69%[i])

Perhaps you have noticed, we rebalance our portfolios in February, May, August, and November.  Rebalancing means we take any cash built up from dividends, contributions, or distributions and invest that cash into positions that have underperformed the rest of the portfolio.  We want to bring the laggards back into the established allocation percentages. Read More

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. Read More

Corrections are Buying Opportunities

Since 1980, the S&P 500 has registered at least one significant drop in value every year.  During those four decades, the average drop per year is 14.3%.  Let me highlight that: every year since 1980, the S&P 500 has had an intra-year decrease in value on average of 14.3%.  This drop is frequently referred to as a Correction[i].  Corrections are no fun.  They keep people up at night worrying about their investments.  What in the heck is going on this time? Is this time different?  My Certificates of Deposits do not correct.  My savings accounts do not correct.  My mortgage does not correct.  Why is it that my portfolio has corrections? Read More