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October 1, 2023

Dear Client: Returns for the major stock indexes in 2023 and the current bond and money market yields are as follows: Index     YTD 2023 Dow Jones Industrial Average       1.09% S&P 500     11.68%   Fixed Income Yields     1 year 2 year 5 year 10 year 30 year Municipals 3.73% 3.65% 3.38% 3.44% 4.42% US Treasuries 5.45% 5.04% 4.61% 4.57% 4.70%   Fidelity Government Cash Reserves Money Market Fund 5.11% Fidelity Money Market Fund Class Premium 5.31%   Despite a solid first-half performance, the markets have recently stagnated.  Overall, the year-to-date performance of the S&P 500 has been respectable, but as highlighted in our 2nd quarter letter, its performance has been dominated by the outsized weightings of just a handful of the index’s largest companies.  The average stock, however, has not performed in 2023, as the equal-weighted S&P 500 index and Dow Jones Industrial Average are flat on the year.  The S&P 500 is trading in line with June of 2021, while the mid and small-cap indexes have traded sideways for nearly three years.  The value indexes have had the best relative performance since the last market high in December 2021 but are still flat after almost two years.  Clearly, the last few years have not been a rewarding time to be an equity investor. The bond market has performed worse.  For the first time, the bond market is on pace to be down three years in a row and is currently in its largest drawdown in history.  The 40-year run of continually lowering interest rates is over, as the 10-year Treasury rate now sits at a...

July 1, 2023

Dear Client:   Returns for the major stock indexes in 2023 and the current bond and money market yields are as follows:   Index    YTD 2023 Dow Jones Industrial Average     4.84% S&P 500    16.93%   Fixed Income Yields     1 year 2 year 5 year 10 year 30 year Municipals 3.01% 2.92% 2.61% 2.55% 3.57% US Treasuries 5.39% 4.90% 4.16% 3.84% 3.86%   Fidelity Government Cash Reserves Money Market Fund 4.88% Fidelity Money Market Fund Premium Class  5.06%   Happy 4th of July!  The market indexes rebounded well in the first half of 2023.  The S&P 500 is up 16.93%, while the Dow Jones Industrial Average is up just 4.84%.  The difference is primarily attributable to the significant outperformance of just seven stocks which comprise nearly 25% of the index: Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla, and Meta.  Aside from Apple and Microsoft, these top names of the S&P 500 are not in the Dow Jones Industrial Average index.  As of June, these names have increased more than 80% on average, while over 70% of the S&P 500 underperformed the market, and more than 200 components have negative returns for the year.  Of the eleven economic sectors, four are negative for the year, while four are barely positive, and nearly all of the market’s outperformance has come from the technology, communication, and consumer discretionary sectors.  The market’s performance has clearly been very concentrated this year; but if a bull market is defined as being up 20% from its lows, then we have entered a new bull market. The equity markets continue to climb the “wall of worry.” ...

April 1, 2023

Dear Client:   Returns for the major stock indexes in 2023 and the current bond and money market yields are as follows:   Index YTD 2023 Dow Jones Industrial Average    0.38% S&P 500    7.03%   Fixed Income Yields     1 year 2 year 5 year 10 year 30 year Municipals 2.47% 2.41% 2.23% 2.28% 3.38% US Treasuries 4.59% 4.03% 3.57% 3.47% 3.65%   Fidelity Government Cash Reserves Money Market Fund 4.59% Fidelity Money Market Fund Class Premium 4.77%   The markets are off to a positive start in 2023.  The S&P 500 is up 7%, while the Dow Jones Industrial Average is flat.  We have had some reversion to the mean from 2022 among the economic sectors, as last year’s best-performing energy sector is down 5%, while the top performers (communication services and technology) have bounced well off their brutal 2022 lows.  Growth stocks (+9%) and value stocks (+4%) have also performed well year-to-date.  The bond market has gained slightly (+2%) after its worst year in history.  Though the S&P 500 index is still trading at the same levels as in April 2021, the markets seem to be gaining some momentum.  Despite the many uncertainties and concerns, we are encouraged by the market’s recent performance, now 17% above the October lows. Investors have undeniably had much to endure in recent memory; one year ago, the markets were rattled by the uncertainty of Russia’s invasion of Ukraine and rising inflation.  Before that, we had to grapple with the impacts left in the wake of the COVID response.  Now, the rapidly rising interest rates are exposing the age-old problem...

January 1, 2023

Dear Client: Returns for the major stock indexes in 2022 and the current bond and money market yields are as follows:   Index Year End 2022 Dow Jones Industrial Average    -6.98% S&P 500    -18.13%   Fixed Income Yields     1 year 2 year 5 year 10 year 30 year Municipals 2.82% 2.67% 2.56% 2.64% 3.63% US Treasuries 4.69% 4.43% 4.00% 3.87% 3.96%   Fidelity Government Cash Reserves Money Market Fund 3.91% Fidelity Money Market Fund Class Premium 4.35%   Happy New Year!  The equity market returns in 2022 were negative for only the third time in 20 years.  The S&P 500 index finished down 18% while the technology heavy NASDAQ closed down 33%.  The Dow Jones Industrial Average performed significantly better yet still down 7% for the year.  Perhaps more notable, the major bond market indexes had their worst year in recorded history, finishing down 13%.  Concurrently, the traditional 60/40 portfolio logged its second-worst year ever (-17.5%).  The markets have continued to make lower highs and lower lows throughout the year despite an October that marked the best month since 1976, and a fourth quarter up by 7%.  This calendar year’s market performance has been nearly the opposite of last year when the market climbed 28% without a single 10% correction.  The value stocks have been the top performers as the major value index funds were down 5%, though significantly better than the overall market.  Any way you look at it, 2022 was not a year to make money in the markets. The Federal Reserve Bank has (and continues to) put the brakes on the economy by...

October 1, 2022

Dear Client: Returns for the major stock indices and the current bond, brokered CDs, and money market yields are as follows: Index     YTD 2022 Dow Jones Industrial Average    -20.95% S&P 500    -24.77%   Fixed Income Yields     1 year 2 year 5 year 10 year 30 year Municipals 3.04% 3.07% 3.13% 3.26% 3.95% US Treasuries 3.95% 4.24% 4.07% 3.81% 3.76% Brokered CDs 4.15% 4.55% 4.75% N/A N/A   Fidelity Government Cash Reserves Money Market Fund 2.54%   The equity markets have been brutal through the first three quarters of 2022.  Despite three intra-year market rallies of 10%, 8%, and 16%, the market has retreated to a new low each time.  The S&P 500 is back to November 2020 levels.  Every major equity index (including foreign), sector (excluding energy), and equity style is down significantly, with the tech-heavy Nasdaq (-32%) leading the decline.  The US equity market’s performance so far in 2022 is the fourth worst start to a year since 1928, and the bond market is having its worst year (-15%) of all time.  Even the textbook 60/40 portfolio, comprised of the S&P 500 and 10-Year Treasury, is down 20% year to date. The US continues to deal with the worst inflation in 40 years.  The Federal Reserve has a dual mandate by Congress to maximize employment and price stability (inflation).  The Fed regularly states they want inflation to hover around or just over 2%.  Clearly, they have been missing their mark, as inflation has remained above 8% in each of the last six months, even as energy prices have been subsidized by a 28% drawdown...

July 1, 2022

Dear Client: Returns for the major stock indices and the current bond and money market yields are as follows: IndexYTD 2022Dow Jones Industrial Average   -15.30%S&P 500   -20.57% Fixed Income Yields        1 year5 year10 year30 yearMunicipals1.64%2.27%2.75%3.25%US Treasuries2.73%3.03%3.00%3.16% Fidelity Government Cash Reserves Money Market Fund1.05% The first half of 2022 has undoubtedly been off to a rough start.  The 20%+ decline in the equity markets from their January 3rd highs has landed us in a bear market.  There has been nearly nowhere to hide as the bond market is also suffering its largest percentage decline ever (-10%) to begin a year.  Every notable equity index is down by double-digit percentages, and each market sector except energy is down for the year.  The value stock indices have significantly outperformed the growth indices in relative performance but are also still down for the year.  The markets have declined by 20% or more 26 times since 1929, three of which have happened in the last five years: the 4th quarter of 2018, the COVID decline of March 2020, and now the first half of 2022.  Though we know the market has recovered after every prior bear market, the patience, fortitude, and values of long-term investors are again being tested. The U.S. is likely in a recession as measured by the National Bureau of Economic Research’s definition: “a significant decline in economic activity lasting more than a few months.”  However, the more commonly referenced definition and harsher standard of two successive quarters of negative real GDP decline is still undetermined.  This is perhaps the most unusual recession of our lifetimes, with more than full employment...