812-853-0878  |  800-355-9624

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 of our clients continue to be rewarded for their patience and long-term discipline.  Though we understand that 20% declines are to be expected, they do not happen often; only 12 times (including last year) since 1948.  We take some solace with knowing the pain endured by the markets has always proven to be temporary, and the conviction to stay the course through the growth and expansion that follows has always led to new stock market highs.  Despite so much dynamic economic news, we continue to be long-term investors and are still positive for 2019.

Looking forward, so much of what is going well in the economy is inherently great news, but we are fully aware of what it means to be a contrarian and understand that the news is always best before the cycle turns.  Consumer confidence is again close to all-time highs, unemployment is near all-time lows, wages are rising and the expansion stage of the economic cycle (in terms of GDP growth) is the longest on record.  We could go on and on, but the U.S. economy is rolling along well! 

Does this mean the markets are overvalued?  We do not believe so.  After negative returns in 2018 (-4%) and knowing that only three times since 1942 have we had back to back negative years in the markets, along with little visible euphoria in the markets, weak flows into equity funds, minimal IPO activity, and low interest rates, we still believe the markets provide opportunity for 2019.  Ultimately, our stock prices will follow the earnings and we are about to enter the first earnings season where the year-over-year quarterly comparisons will both reflect new corporate tax rates.  We are optimistic for these reports because there have been few earnings warnings, and believe these companies that are flush with cash will continue to be productive with their resources. 

Moreover, the dividend yields of so many of our companies are higher than the 10-year Treasury Bond (2.41%).  Forgive us for being so obstinate, but how can a long-term investor ever be content with a 2.41% return while great American companies like Procter & Gamble, McDonalds, and Johnson & Johnson are paying larger dividends, and have increased them every year for decades?  We know what the answer to this question would have been back in 1994, and are confident it is still the same answer going forward.

Thank you again for your continued confidence in LYNCH & Associates.  We look forward to the opportunities and challenges ahead of us.  As always, we welcome you to schedule an appointment to review your personal financial situation.


Ryan T. Lynch, CFP® ChFC®


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 [email protected].

Office:  10644 Newburgh Road, Newburgh, IN 47630