The Tufton Viewpoint, Winter 2018: Confidence is King

by Chad Meyer

In this space, a bit over twelve months ago, I admitted that I didn’t have a clue what sort of market 2017 would bring. “Perhaps the economy will thrive…buoyed by the message that America is now ‘open for business’,” I wrote. “Or perhaps…our new president-elect will prove uniquely problematic, unduly influencing the market one late-night ‘tweet’ at a time.”

On Wall Street, however, where confidence is king, well-paid prognosticators were obliged to issue a more definite outlook. And as you may recall, that outlook was rather bleak. On January 3, 2017, CNBC reported that Wall Street’s collective annual forecast was the most bearish it had been in over a decade. The following day, Goldman Sachs warned clients of “downward pressure” on U.S. equities. With sociopolitical tumult and a bull market that was officially long in the tooth, it seemed as though worrying over a slowdown was the respectable analyst’s only prudent move.

What happened next is history. Over the last twelve months, that bull market has grown even longer in the tooth, surmounting the Street’s “wall of worry” (and continued sociopolitical tumult) in truly rare form. In 2017, while volatility sat at historic lows, the S&P 500 rose 22% (total return), posting its largest yearly gain since 2013. Not to be outdone, the Dow Jones shot up 25%, its second-biggest annual gain of the last decade. With this increase, it turned in nine consecutive months of growth, its longest streak since 1959. So much, it would seem, for those January jitters.

Yet, pleasant as the market’s surprises were in 2017, one question still looms large. What should investors expect in the year ahead? Given the strong start U.S. equities have already had in 2018, it’s no surprise that many once-dour pundits have taken on a sunnier tone. Open the morning paper, and you’re likely to read about the market’s “record run,” spurred on by an encouraging global economic outlook. As Goldman Sachs’ asset management arm now succinctly puts it, “We think equities will continue to outperform in 2018.”

We certainly hope Goldman Sachs’ prognostication will prove to be the case. However, all good things must eventually come to an end, and we at Tufton Capital will continue to implement a bottom-up, value-driven investment philosophy that delivers performance in a strong market—and perhaps more importantly – provides peace of mind when things take a turn for the worse. For twenty-two years, this approach has kept our clients in good stead from the “Great Recession” of 2008 throughout the “great gains” of 2017.

As we charge into 2018, I will again forgo a firm “outlook”. Instead, I offer this simple assurance. Above all else, your team of investment professionals at Tufton Capital remains honored by your trust and committed to your interests. From all of us here at Tufton Capital, Happy New Year.