With class officially back in session, it is perhaps fitting to greet fall with the words of an author familiar to most every American student. “October,” wrote Mark Twain, “is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August, and February.”

If there’s any truth in numbers, it appears Mr. Twain was at least partially mistaken. Rather than unleashing “peculiar” peril, October (as of this writing) has offered the kind of across-the-board gains to which American investors have, by this point, become accustomed. This follows a ho-hum third quarter where both the Dow Jones and NASDAQ fell slightly while the S&P 500 eked out a 0.58% total return. Driven in large part by continued robust earnings growth and Federal Reserve support, each index closed out September near record highs, although the real heavy lifting occurred in July and August before the September slide. From a macroeconomic perspective, the story stays much the same since real GDP growth is expected to clock in at an annualized 5.7%, and consumer and executive confidence remain high.

Yet (to invoke the spirit of Huck Finn) there’s always the prospect of mischief hiding in the rafters. Governmental concerns such as the continued fighting in Congress over the debt ceiling and legislation for infrastructure and social programs, economic and financial indicators related to inflation, supply-chain issues and frothy equity valuations cause many forecasters to be cautious moving forward. After being a boon for the economy, fiscal stimulus, in the form of gigantic federal spending, may now prove to be problematic for the financial markets. Government spending that focused on the pandemic is ebbing. There is broad consensus that taxes will increase to help pay for that spending. And, because many people took direct stimulus payments and invested them in the equities markets, stocks ran up faster than they perhaps would have otherwise.

Granted, some of this bet-hedging is inevitable in the context of a historic bull-market run. There is, one might say, an intuitive logic to looking for one’s chair once the record starts playing on repeat. But setting that generalized anxiety to the side, it is also clear that a new consensus is forming around the market’s former “can’t miss” stocks. While the “FAANG gang” will almost certainly turn in respectable year-over-year growth, its status as the horses pulling the cart appears shakier by the day.

So with all manner of portends, both favorable and fearsome, swirling around the marketplace, where exactly is your team of investment professionals turning its attention? Put briefly, towards opportunity—the sort that the “can’t miss” crowd often overlooks. As some cracks may begin to show on the vaunted “FAANG” gang, we believe investor attention will continue to drift towards our more value-oriented neck of the woods. As it does, we are uniquely well positioned on your behalf to capture the upside of a “sector shift”.

More tellingly, though, even if the market stays much the same, with the high-flyers rising back into orbit, we remain confident that our disciplined approach will continue to provide impressive performance at an acceptable rate of risk. That, in a word, is the beauty of buying on the fundamentals. From all of your advisors here at Tufton Capital, we thank you for the trust you have placed in us, and we remain committed to the steadfast pursuit of your interest, all twelve months of the year.

Chad Meyer, CFA

President