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October 1, 2019

Dear Client: Returns for the major stock indices for 2019, and the current bond and money market yields are as follows: Index YTD 2019 Dow Jones Industrial Average     16.81% S&P 500     20.44% Fixed Income Yields 1 year 5 year 10 year 30 year Municipals 1.27% 1.28% 1.47% 2.11% US Treasuries 1.75% 1.55% 1.67% 2.12% Fidelity Government Cash Reserves Money Market Fund  1.69% As we celebrate our 25th year at LYNCH & Associates, we believe it is important to recognize that the equity markets are having a great year.  Despite the negative sensationalism in the financial media, the markets are only one percent off of their all-time highs.  The month of August gave investors a negative return as the looming recession was the focus and every media pundit seemed certain of its imminence.  As near all-time highs came in September, much of this hype has subsided.  We believe it is important to remember that even though recessions are a natural part of the business cycle, they do not always bring certain market declines.  We remind you that during five of the last ten recessions the equity markets increased.  As we have written, a common thought process is to immediately ascribe the pain of the most recent recession (Great Recession of 2008-09) as the standard market reaction to a recession.  It is easy to think we may be due for a recession (and perhaps we are) being that a decade has now passed, but recessions do not come from old age as we note that Australia has not had a recession for 28 years.  For many reasons, we have...

July 1, 2019

Dear Client: Returns for the major stock indices for 2019, and the current bond and money market yields are as follows: Index YTD 2019 Dow Jones Industrial Average     15.28% S&P 500     18.54% Fixed Income Yields 1 year 5 year 10 year 30 year Municipals 1.28% 1.34% 1.62% 2.40% US Treasuries 1.93% 1.76% 2.01% 2.53% Fidelity Government Cash Reserves Money Market Fund  2.07% Happy 4th of July!  As we celebrate the birth of our nation, we would like to reflect on the incredible first half of 2019 in the equity markets.  We just recorded the best June in the stock market since 1955 and are up over 18% year to date.  We again endured volatility as the month of May was down 6.35% alone for the S&P 500, reminding us that markets do not go straight up.  By the end of June, the markets fully recovered all of May’s decline.  Though we are never comfortable over-emphasizing short-term markets, we believe it is healthy to reflect on the values of resilience, discipline and the grinding faith that markets will ultimately appreciate over time for inherent reasons.  We also take some solace knowing the U.S. equity markets have rallied back to new highs after every decline. With the above optimism in mind, we are always concerned about the future and as is said repeatedly in this business: past performance is no guarantee of future results.  We have written multiple times about our concerns for attractive fixed income options due to falling interest rates and rising bond prices (remember the inverse correlation: as bond prices rise, interest rates fall).  In our...

April 1, 2019

Dear Client: Returns for the major stock indices for 2019, and the current bond and money market yields are as follows: Index YTD 2019 Dow Jones Industrial Average     11.81% S&P 500     13.65% Fixed Income Yields 1 year 5 year 10 year 30 year Municipals 1.51% 1.59% 1.89% 2.72% US Treasuries 2.39% 2.23% 2.41% 2.81% Fidelity Government Cash Reserves Money Market Fund  2.13% As we begin our 25th year at LYNCH & Associates, we would like to take the opportunity to thank all of you for your continued confidence.  Since our opening in December 1994, the S&P 500’s compounded annual growth rate has been 11%.  In that time, we have seen countless reasons for the markets to be fearful and euphoric: the internet boom and bust, 9/11 and terrorism, the housing boom and collapse, the Great Recession, enormous technological progress and huge economic expansion.  The fears and advancements are too many to count.  Through it all, we believe our continued principles of bottom-up, growth-oriented investing, owning the highest quality individual securities while being insistent on the long term, have and will continue to serve our clients well.  We repeat that it is the discipline to rationally adhere to sound investing principles during the difficult market times that will be most important to investing success. The first quarter of 2019 shaped up to be the best quarter since 1998.  After a very difficult fourth quarter where the S&P index dropped 20% from its all-time high on September 21st to its low on December 26th, the markets have snapped back quite impressively.  It has been great to see so many...

October 1, 2018

Dear Client:   Returns for the major stock indices through the third quarter of 2018, and the current bond market yields are as follows:   Index YTD 2018 Dow Jones Industrial Average      8.67% S&P 500      10.56%   Fixed Income Yields 1 year 5 year 10 year 30 year Municipals 1.92% 2.23% 2.62%     3.26% US Treasuries 2.57% 2.94% 3.05% 3.20%   Through the first three quarters of 2018, the markets have continued to deliver successful results.  The equity market indices have again reached all-time highs as have your stock based portfolios.  The economy is firing on nearly all cylinders as eight of the eleven sectors in the S&P 500 are positive for the year, and 80% of the companies topped their earnings estimates in the 2nd quarter.  The markets are still benefiting from the lower corporate tax rates, which have significantly contributed to impressive year-over-year earnings growth.  In each of the first two quarters earnings have been up over 20% and we have yet to see the 3rd and 4th quarter numbers, which we do not believe will be anything but remarkable.  The U.S. markets have dominated their foreign counterparts as the total U.S. equity market capitalization has risen this year from 36.60% to 40.16% of the total world equity market cap.  By now, you are fully aware we are in a bull market and have been for almost a decade. At LYNCH & Associates, we believe to be successful as an investor, one must be dedicated to a long-term vision.  We admit we sound like a broken record beating the long-term drum.  As highlighted in multiple...

July 1, 2018

Dear Client:   Returns for the major stock indices for the first half of 2018 and the current bond market yields are as follows:   Index YTD 2018 Dow Jones Industrial Average -1.81% S&P 500 +1.67%   Fixed Income Yields 1 year 5 year 10 year 30 year Municipals 1.47% 2.00% 2.47% 3.00% US Treasuries 2.31% 2.74% 2.86% 2.99%   The first half of 2018 has been fairly uneventful for the overall stock market.  The markets peaked on January 26th, then had a quick 10+ percent decline.  Now we have clawed our way back, but the Dow and S&P 500 are still off their all-time highs by 8 percent and 5 percent, respectively.  There have, however, been some bright spots in the market; small-capitalization stocks have performed well, as have some of the large Nasdaq/FAANG names we mentioned in our first quarter letter.  Despite some strong performances, the overall market has been boring year-to-date; or more plainly said, ordinary.  The markets’ performance in 2018 have not been particularly interesting, but investing is not supposed to be entertainment.  REAL investing is not a game; it is mundane, routine and long.  Successful long-term investing is a lethargic combination of discipline, grit, grind and humility.  Long-term investing can be studied, but in reality can take lots of time, introspection and experience to accept as a discipline. When I began at LYNCH & Associates 23 years ago, I was as green as could be but excited for the future and eager to learn everything about investing.  I was determined to prove to myself, my family and the clients of LYNCH & Associates that...

April 1, 2018

Dear Client: Returns for the major stock indices for the first quarter of 2018 and the current bond market yields are as follows:   Index YTD 2018 Dow Jones Industrial Average -2.49% S&P 500 -1.22%   Fixed Income Yields 1 year 5 year 10 year 30 year Municipals 1.55% 2.07% 2.48% 3.01% US Treasuries 2.08% 2.56% 2.74% 2.97%   The equity markets are off to a bumpy start in 2018.  After a blistering January, continuing the unprecedented, non-stop (15-month in a row) rise since the presidential election, the market experienced one of the fastest 10% declines (January 26th to February 8th or nine trading days) in history.  The markets have not recovered back to the highs of January as we have just logged our first down quarter since the third quarter of 2015.  We could write at length about algorithmic trading, tariffs and other noise associated with short-term market declines but won’t because we do not believe them to be relevant to long-term investors and do not want to give merit to this type of short-term dialogue.  As long-term investors, we know the markets regularly correct and we understand that the uneasiness associated with market volatility is the price we must pay to be long-term investors.  However, we will always continue to seek perspective, humility and assurance. The primary objective of our quarterly letters is to highlight our most relevant thoughts on our outlook for the current markets.  Despite recent market turbulence, we continue to remain positive on the equity markets for 2018 for many reasons.  The following indicators we highlighted from one year ago are still in place...