The Tufton Viewpoint, Winter 2019

by Chad Meyer CFA

For all of its joys, the holiday season also has a well-documented history as a source of stress. While they couldn’t all have been hosting their in-laws for an extended visit, American investors certainly bore the brunt of that phenomenon this past December. As trees were lit and skis waxed, market commentary ranged from stunned disbelief to gallows humor. Perhaps no­where was the mood more accurately captured than in the Wall Street Journal’s Christmas Eve headline: “On the Bright Side, The Market Closes Early Today.” Bah humbug, indeed.

By the numbers, this pervasive pessimism was amply justified. The S&P 500 and Dow Jones Industrial Aver­age turned in respective tumbles of nearly 14% and 12% in the fourth quarter. Both performances were punctu­ated by the worst December drop either index had seen since 1931. Unable to lean upon the once-invincible “FAANG” gang, the Nasdaq followed a similar script, plunging a remarkable 17.5%. With a year’s worth of gains (and then some) melted away, the perches of Sep­tember suddenly felt like ancient history.

At the new year’s outset, Mr. Market hardly made a compelling case for renewed hope. The first two trading days of 2019 were the bleakest in nearly twenty years. A few short weeks later, Apple cut its revenue forecast for the first time in over a decade, prompting its S&P peers to lower their collective outlooks as well. Inquiries of a “macro” scope predictably ensued. Was the econ­omy overdue for contraction? Would trade talks with China turn sour? Should investors take cover for the year ahead?

But while this sort of market analysis kept many partic­ipants glued to their proverbial sets, the actual market did something remarkable – it got back to work. As this note goes to press, American stocks have notched their fourth consecutive week of gains. Strong jobs growth and a flexible Fed are providing a strong coun­terbalance to those early-January jitters. The good news isn’t just local. Major indices in Europe, China, and Japan are all up at least 3% for the year. In other words, while the Grinch may have stolen Christmas, there’s reason to believe he didn’t make off with the next fiscal year as well.

Of course, those aforementioned “macro” questions will continue to loom. And neither I nor anything you’ll find in the pages ahead will presume to answer them. (Yet again, Santa forgot to bring my crystal ball.) Instead, as we set out into 2019 together, I’ll simply reiterate a principle that has guided this firm and its clients since 1995. A good business, bought at a fair price, is one of the most powerful – and reliable – wealth-creation vehicles in the world. From all of us here at Tufton Capital, we thank you for the trust you have placed in us, and we look forward to the tireless pursuit of your interests this year and in many more years to come. Here’s to a Happy New Year for you and yours…and to a bit less stress come next Decem­ber.