Let me begin with what matters most – your family’s health. In these humbling times – times in which young couples are married on the front lawn, and new fathers are locked out of the delivery room – one cannot help but be reminded of life’s true priorities. As the pandemic continues to visit disquiet and disruption upon families around the world, it is my sincere hope that this letter finds you and your loved ones in good stead.

Now, onto the market. In almost perfect contrast to the three months preceding it, the year’s second quarter enjoyed a historically strong stock market performance, with investors regaining ground they had scarcely come to terms with losing. Providing a much-needed respite from otherwise gloomy news, all major indices notched heady growth by June’s end, with the S&P 500, Dow Jones and Nasdaq rising by 20%, 18% and 31%, respectively. But even as market participants rejoiced at this reversal of fortune, anxious questions rose to the fore. How long would the good times last? What “shape” would the recovery ultimately take? And perhaps most vexingly, how could one account for the much-discussed disconnect between a shell-shocked economy and soaring stocks?

On the latter point, expert opinions about what exactly the stock market was up to were (and remain) as myriad and contradictory as those regarding COVID-19. And that’s no coincidence. It becomes readily apparent after canvassing the headlines that financial analysis has, in some circles, been supplanted by public-health proposition betting. Explaining a market rally in the midst of record unemployment, the Wall Street Journal reported in early May that new cases of the virus had “moderated” in the U.S., where stocks were jumping “on any signs of progress toward a potential vaccine.” By the month’s end, it was clear the sword cut both ways, with Forbes attributing a one-day drop to skepticism around a potential vaccine’s trial results. While other indicators – jobs reports, new home purchasing, gasoline sales and the like – have come and gone, there is simply no disputing that prospective medical outcomes have become the market’s new lodestar.

This is, to a certain degree, inevitable. Given its extraordinary impact on American life – and as anyone who has held a conversation in the last four months can readily attest – the pandemic has come to play a commanding role in everything from politics to professional sports. So too, then, for the markets. But as Kenneth Frazier, CEO of the pharmaceutical titan (and long-time Tufton holding) Merck (MRK), stressed in a recent interview, there is scant precedent to support the pinning of short-to-medium term economic hopes on the vaccine development process.

With all due apologies to my high school science teacher, I cannot count myself among those who fully grasp exactly what it is a vaccine “does.” Nor, for that matter, can I hazard a guess as to when the folks who do have that knowledge will finish the work that, by all accounts, now proceeds at a furious clip. So rather than stabbing blindly at the “big question” of the day, I’ll simply make a promise. Here at Tufton Capital, we honor the trust you’ve placed in us by working with the knowledge we have – not the knowledge we wish we had. As value investors, that means leveraging a disciplined, bottoms-up approach to find great companies trading at a fair price. And while we certainly aren’t blind to the need to stay abreast of COVID-19 news, we take comfort in the fact that for over two decades, our conservative approach has excelled amidst “macro” crises of every ilk. With so much uncertainty in the world, I hope you will take comfort in the same. From all of us at Tufton Capital, here’s to the continued health, wealth and happiness of you and yours.

Chad Meyer, CFA

President