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 I could succeed and add value to their lives. I had mentors around me who had all been long-term investors, like my dad, my grandfathers, colleagues and many wise, investing-savvy clients. The markets were in the final years of a 25 year bull market (1975-2000) and though I did not know at the time, the markets were white-hot. In hindsight, I confused being a smart investor with ego, great skill and creativity. I felt the natural tendencies to want to greatly outperform the markets and deliver exceptional results as quickly as possible.
All these years later, I would like to thank my dad, my grandfathers and my wise, old clients (some are reading this now) for passing on the knowledge, values and lessons learned. Though I cannot be certain, the technology stock bust (2000-2002) or the housing debacle (2007-2009)
could have done much more lasting damage to me had I been without experienced mentors. I would have been tempted to stray from the values and disciplines that are the foundation of LYNCH & Associates.
My dad once told me that it usually takes people until about age forty to become a long-term investor. He said it fairly casually, but it has always stuck with me. Now that I am 45 with twenty plus years in the business, his words are becoming clearer to me all the time. How many times do I have to watch stock traders struggle? How many times do I have to watch people buy stock options only to swing and miss? How many times do I have to hear someone quote a doomsday newsletter?
What I believe my dad meant was, “I’ve been there, done that.” Perhaps he understood that I, too, would have to learn the hard way. I believe he meant there is no magic; the real magic is staying the course, having principles, investing without emotion, owning the highest quality investments, staying diversified and not chasing the flavor of the month. I have learned that sound investing takes time because you have to live through some economic cycles and experience the positive and negative emotions that ride on the backs of these cycles. You also have to understand what you believe so you can persevere in the tough times, knowing that proper due diligence must include an objective consideration of your own humility.
Being in the investment business for over two decades, you start to see history repeat itself, and as is said in the investment business “investors do not have opinions, they have positions.” The positions of our longest and wealthiest clients are the biggest and bluest of the names; stocks that have been increasing their dividends every year of my life, like Johnson & Johnson, Emerson Electric, Abbott Labs and so many more. That might surprise you, but I am no longer surprised. Many of these same wealthy, investment-savvy clients also took the long road. They were bruised and battered, chasing the flavor or the trade of the month too; they were once young, starry-eyed and blinded by ego as well, but they finally learned: Investing is boring. It requires enormous patience. It is owning the very best investments for the long haul.
We are both happy and sad to announce the retirement of our long-time colleague and friend, Wayne Ramsey. Wayne served the clients of LYNCH & Associates for 18 years and was a loyal, trusted and valuable colleague of my dad’s dating back to the early 1980s. Wayne added great value to our firm and served as a mentor and friend to all. We thank Wayne for many great years and wish him all the best.
We genuinely appreciate your business and value the trust you have placed with us in the management of your financial assets. As always, we welcome and encourage you to schedule an appointment to review your personal situation.
Sincerely,
Ryan T. Lynch, CFP® ChFC®
President
Form ADV Part II of the LYNCH & Associates Uniform Application for Investment Advisor Registration and the LYNCH & Associates Code of Ethics are available to all clients at any time. If you would like to receive a copy, please contact Jennifer Farless at (812) 853-0878 or jfarless@LNAonline.com.
Office: 10644 Newburgh Road, Newburgh, IN 47630
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