In this space, a bit over twelve months ago, I admitted that I didn’t have a clue what sort of market 2021 would bring. “Perhaps the economy will thrive…buoyed by the message that America is now ‘open for business’,” I wrote. “Or perhaps…historically low interest rates coupled with strong corporate earnings and healthy balance sheets may lead to another strong year for the equity markets.”

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 a bit bleak. On January 3, 2021, several financial networks reported that Wall Street’s collective annual forecast was less than bullish, pointing to worries ranging from continued Covid-19 anxieties to rising interest rates to lofty valuations. The following day, a major investment bank 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 2021, while volatility sat at historic lows, the S&P 500 rose 28% (total return), posting its third annual double-digit gain in a row. Not wanting to be left out, the Dow Jones shot up 19%, its fourth biggest annual gain of the last decade. So much, it would seem, for those January jitters.

Yet, pleasant as the market’s surprises were in 2021, one question still looms large. What should investors expect in the year ahead? Given the difficulties that U.S. equities have already had in 2022, it’s no surprise that many dour pundits from this time last year remain a bit sour when looking at the year ahead. But for every market pessimist, there’s always an investor taking the other side of the bet (isn’t that what makes markets?). Open the morning paper, and you’re likely to read the bulls forecasting another “record run” for the market, 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 2022.”

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-six years, this approach has kept our clients in good stead from the “Great Recession” of 2008 throughout the “great gains” of 2021.

As we charge into 2022, I will again forgo a firm “outlook”, since Santa, yet again, forgot to bring my crystal ball. 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.

Chad Meyer, CFA
President