Dear Client: Returns for the major stock indices for 2020, and the current bond and money market yields are as follows: Index2nd QuarterDow Jones Industrial Average -9.55%S&P 500 -4.04% Fixed Income Yields1 year5 year10 year30 yearMunicipals 0.21%0.46%0.86%1.70%US Treasuries 0.15%0.29%0.66%1.41% Fidelity Government Cash Reserves Money Market Fund0.01% So far, 2020 has been quite a tumultuous year; and we are only halfway through! As we all know too well, the decade-long bull market came to an abrupt halt in February as COVID-19 created a nearly unprecedented type of fear and great uncertainty. In the fog of the times, traders panicked and pushed the markets down 33 percent from the all-time highs. As we remember, there were no easy answers for investors. In March, we wrote that everything we have ever understood about investing is not to panic, and not to overreact. We know that trying to time the market is difficult, and just when the fear is at its highest, the markets can turn quickly without pause; and sure enough, March 23rd marked the beginning of the best 50-day rally in market history. As the markets recorded their best quarter since 1998, the age-old contrarian axiom to “buy when no one wants them and sell when everyone wants them” again proved to ring true. We have again been reminded that truly buying low is always difficult because the fear and uncertainty are at their highest and this time was no exception. Undoubtedly, we live in unusual times, and with investing it is no different. These markets have many of the most respected voices on Wall Street voicing an array of differing... read more
Dear Client: Returns for the major stock indices for 2020, and the current bond and money market yields are as follows: Index1st QuarterDow Jones Industrial Average -23.20%S&P 500 -20.00% Fixed Income Yields1 year5 year10 year30 yearMunicipals1.07%1.17%1.44%2.08%US Treasuries0.15%0.37%0.67%1.34% Fidelity Government Cash Reserves Money Market Fund0.15% We are all well aware of the latest market-moving news. First, we hope this letter finds everyone healthy and safe. We know it is an understatement to say that we are all impacted by the COVID-19 virus. We are all confronted with similar challenges, primarily the question of what we should do to best protect ourselves and families from the threats of this virus. These challenges range from healthcare concerns to employment and financial considerations and ultimately, how best to care for those we love. The burdens are heavy, and the uncertainties can be overwhelming. We know and empathize, as we feel it too. As with all challenges in life, we have risks to measure, problems and opportunities to resolve and decisions to make. Fear, panic, and emotion; everything we have ever studied concerning making rational investment decisions has taught us to be mindful to not act on emotion. We know that feelings and emotions are temporary, felt in real-time and spark internal responses associated with anxiety and fight-or-flight responses. These feelings are real and they affect our behaviors, decisions and quality of life. Though we are not medical experts and perhaps cannot well articulate the biological experience going on in times of stress, we can add some perspective on market history and reflect on how markets withstood other times of fear, panic and recovery.... read more
Dear Client: Returns for the major stock indices for 2019, and the current bond and money market yields are as follows: IndexYear-End 2019Dow Jones Industrial Average 25.34%S&P 500 31.49% Fixed Income Yields1 year5 year10 year30 yearMunicipals1.06%1.14%1.48%2.15%US Treasuries1.57%1.69%1.92%2.39% Fidelity Government Cash Reserves Money Market Fund 1.32% Happy New Year! As we begin the new decade, please again recognize how your commitment to long-term investment principles has rewarded you this year. 2019 was the best year to be an equity investor since 2013. Not only was the year strong in market performance, there was minimal volatility as 10 of the 12 months posted positive results and each sector in the S&P 500 increased for the year. We had three market declines over five percent but did not record a single decline of ten percent in any of the major market indexes. Also, the decade ending in 2019 proved to be a rewarding one for investors, averaging an annualized 13% rate of return, though only the 4th best decade since 1930 trailing the 1950s, 1980s, and 1990s. No matter how you slice it, this past year and decade again proved to be excellent periods for long-term investors. As we reflect on a great year and decade in the markets, we still remember the negative year in 2018 and the relatively quick 20% decline in the 4th quarter of 2018. We wrote one year ago, at the low of the markets, how we remained optimistic for the year ahead. Though we know short-term market calls are difficult, we know we have to continue to make risk decisions based on rational, thoughtful, and principled processes.... read more
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... read more
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... read more
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... read more
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... read more
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... read more
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... read more
Dear Client: Returns for the major stock indices for 2017 and the current bond market yields are as follows: Index 2017 Dow Jones Industrial Average 28.08% S&P 500 21.82% Fixed Income Yields 1 year 5 year 10 year 30 year Municipals 1.44% 1.70% 2.01% 2.62% US Treasuries 1.73% 2.21% 2.41% 2.74% As we close out 2017, long-term equity investors have had another very successful year. Not only was 2017 a successful year, it was one of the steadiest market performances in history. The market increased in all 12 months and the S&P 500 index never declined over 3% in 2017. This extraordinarily low volatility certainly will not last but is consistent with healthy bull market rallies. The S&P 500 made 63 new highs while the Dow Jones Industrial Average logged 70 new highs in 2017. Quite clearly, investors are buying market dips and optimism for the equity market is undoubtedly back. While it is easy to reflect on good times and celebrate successful years, we never forget the stock market is a discounting mechanism that processes present and future expectations and current events. Despite inevitable bumps in the road ahead, we still believe the equity markets are poised to reflect continued growth and will continue to benefit from the lack of attractive alternatives available to investors. At LYNCH & Associates, we do our best to be grounded in humility, as we have written that getting bogged down explaining away the day-to-day gyrations of the markets can be a fool’s errand. We know that trying to interpret or predict short-term movements in the markets is impossible and has... read more
